Everyone knows that expanding the role of the European Central Bank—by making a commitment to unlimited sovereign bond purchases or providing virtually unlimited funds to the European Financial Stability Facility—is the obvious way out of this crisis, and now all bets are off between Germany and France about whether or not the bank can intervene.But the Germans are saying all the wrong things this morning, making it obvious that they just don’t understand the scale of the crisis.
“If politicians think the ECB can solve the euro crisis, then they are mistaken,” German Chancellor Angela Merkel told Reuters this morning. “I am convinced that only political solutions can resolve the situation,” adding that such measures consist of stronger fiscal reforms and treaty changes, a process that is incredibly time consuming.
Adding fuel to the fire, German Vice Chancellor Philipp Rösler confirmed just how distanced the Germans are from reality as he reportedly said this morning that EU leaders should have even fewer summits.
Now everyone in Europe—in particular, Spain, Ireland, and France—is ganging up on Germany, endorsing one of two solutions (via Reuters):
– French Finance Minister Francois Baroin said this morning, “The position of France… is that the way to prevent contagion is for the EFSF to have a banking licence” which would allow it to borrow massive sums from the ECB.
– “The ECB’s role is to ensure the stability of the euro, but also the financial stability of Europe. We trust that the ECB will take the necessary measures to ensure financial stability in Europe,” said French government spokeswoman Valerie Pecresse, suggesting that the ECB will need to take a bigger role in stemming the crisis.
These statements expound upon those made by Irish PM Enda Kenny and Greek PM Lucas Papademos yesterday, calling for more radical action.
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