Merkel aims to strengthen the “political union” to get Europe out of the crisis
On Thursday, the German Chancellor Angela Merkel called for strengthening European political union, a long-term proposal, which contrasts with the claims of many of its partners to provide urgent solutions to the debt crisis, at a time when Spain wobbles.
“We need more Europe (…) a fiscal union (…) and we need first and foremost a political union. We step by step to transfer powers to Europe,” Merkel said in televised remarks.
This approach involves the construction of a two-speed Europe. “We must not stay still because it either does not yet follow” this orientation, the head of government stressed the economic powerhouse of the continent.
Merkel also poured cold packs to those who expect the summit of the European Union (EU) in late June in Brussels constitutes a decisive step in solving the crisis that forced the rescue of Portugal, Ireland and Greece, which is also the edge out of the Eurozone, and is on the line to Spain.
There is no summit “able to fix everything at once,” he said.
A clarification will undoubtedly be of little consolation for Spain, which on Wednesday was given within fifteen days to decide whether to ask for help from Europe to recapitalize their banks.
The market pressure again became evident Wednesday, when the Spanish Treasury had to offer higher yields above 6%, to finance its debt obligations to ten years.
The performance of these securities rose to 6.044%, 5.743% compared to the last issue similar.
Germany gets funded instead to historically low levels (from 1.357% in the debt markets on Thursday morning), to enjoy the confidence of investors.
The suspicion against Spain is due to the fragility of its banking sector following the bursting of the housing bubble in 2008, which paralyzed the economy and unemployment fell in nearly a quarter of the workforce.
According to Spanish daily ABC, the IMF estimated that the Spanish bank bailout funds would require an injection of 40,000 to 80,000 million euros.
Merkel also reiterated its calls do not loosen the severe fiscal adjustment programs, despite criticism that they wake up in their partners, which are increasingly a factor stifling their economies.
“Fiscal consolidation and growth are two sides of the same coin,” declared the Chancellor.
Germany faces even pressure from countries outside the euro zone, as the U.S. and Britain (which belongs to the EU but the currency bloc) to facilitate the adoption of urgent measures against the crisis.
U.S. President Barack Obama and British Prime Minister David Cameron, called on Wednesday to launch an “immediate plan” to resolve a crisis in the euro area.
France, Germany’s main partner in the Eurozone, also calls for quick impact initiatives, such as the Eurobond issue that would mutualise debt of several countries and thus reduce the interest paid by weaker partners.
Europe also faces two key political appointments on 17 June: the parliamentary elections in Greece and France.
In Greece, it is a repetition, after the parties were in favor of the settings in the minority in the elections on May 6 and failed to form a government.
In France, the left will try to secure a majority in the implementation of the newly elected Socialist president François Hollande.
The President of the European Central Bank (ECB), Mario Draghi, on Wednesday urged European leaders to “clarify” in the European Summit of 28 and 29 June, her vision for the future of the euro.
“In the next European summit what we hope is a clarification of this view. What we have in mind is a path to a goal and (definition of) all the conditions that must be met to achieve this,” he said.
The French Minister of Economy, Pierre Moscovici, proposed on Wednesday a “direct recapitalization of banks” from the bailout funds in the eurozone, in particular the European Stability Mechanism (MEDE) will enter into force on July 1, replacing the European Financial Stability Fund (EFSF).
But Germany again rejected it. “These tools should be used by a government and with conditions,” said Merkel’s government spokesman, Steffen Seibert.
The discussion arose again Thursday when the Finance Minister of Sweden (EU member but not in the Eurozone), Anders Borg, said in favor of using a European mechanism, without naming him, to help Spanish banks to strengthen its reserves.
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