IMF to Call on EU for Increase in Bailout Fund, Bond Purchases

Germany is in the center of the turmoil; it is thought that Chancellor Angela Merkel’s call for investors to share in any losses was a major contributing factor to last week’s market woes. The German government has said it sees no reason to increase the rescue facility. However, Berlin may be under further pressure to ante up if investors are still spooked on Monday. If Portugal and perhaps Spain need assistance, the rescue facility’s current funding level will be tested.

But Merkel has expressed concern that German taxpayers will be reluctant to keep paying for bailouts; in fact, German Finance Minister Wolfgang Schaeuble has warned that there is a need to take seriously the rise of ananti-euro party. Reuters reported that among German academics and on some Internet forums the idea of that nation leaving the euro has taken hold, and in a recent poll a majority of Germans said the country would have been better off with the deutschmark instead of the euro.

Adding to the unease surrounding Germany, on Saturday Berlin denied a report that Merkel had threatened Germany’s exit from the euro during an October meeting with other euro zone leaders. A British newspaper quoted her as saying during a heated discussion with Greek Prime Minister George Papandreou, “If this is the sort of club the euro is becoming, perhaps Germany should leave.”

Steffen Seibert, Merkel’s spokesman, denied she made any such comment, reiterating the German government’s commitment to the euro. And Guido Westerwelle, the nation’s foreign minister, said to the Berliner Zeitung that Germany’s prosperity was tied to the euro.