Calls for action seem to be everywhere throughout the eurozone with the exception of Germany, where Chancellor Angela Merkel’s insistence on adhering to austerity is increasingly isolating her from the rest of the region. And as worries rise over financial catastrophe, the slowdown that has afflicted much of the global economy is taking its toll as far away as Asia, where in China the purchasing managers’ index fell below economists’ expectations.
Bloomberg reported Friday that Italy went on the attack against Merkel, with Prime Minister Mario Monti saying that Merkel’s determination to bring about a stable eurozone economy “risks being undermined because of lack of promptness in setting up the necessary instruments to limit the contagion.” He also advocated formulating a plan for common borrowing, a policy Merkel strongly opposes.
He was quoted saying on Thursday to a European Parliament committee in Brussels, “Countries that are at the core of the system and which have had the huge merit of instilling the culture of stability to the European Union in the first place, most notably Germany, should really reflect deeply but quickly. Europe should really accelerate the efforts, as the European Commission is doing, in order to limit the contagion.”
Mario Draghi, head of the European Central Bank (ECB), added to the clamor, telling the committee that unless policymakers took more aggressive action, the euro “is being shown now to be unsustainable unless further steps are being undertaken.”
He added that it was not the mission of the ECB to compensate for policy failings in the eurozone. “It’s not our duty, it’s not in our mandate” to “fill the vacuum left by the lack of action by national governments on the fiscal front,” on “the structural front, and on the governance front,” he said in the report.
On Wednesday the European Commission (EC) had proposed Europe-financed bank recapitalizations and the development of a timetable for euro bonds. Merkel flatly rejected such ideas, and on Thursday suggested a timeline of “5 to 10 years” to fix the problems the crisis has revealed in the joint currency.
Monti, Draghi and Bank of Italy Governor Ignazio Visco all urged Merkel to support the EC’s proposal to permit the banks to receive money directly from the European Stability Mechanism (ESM) instead of having to go through governments.