Merkel vows action to end crisis at long last

 
Tim Wallace
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GERMAN Chancellor Angela Merkel said Europe was ready to act to ensure stability in the Eurozone, yesterday, while Prime Minister David Cameron called for “urgent action” to tackle the debt crisis.

However, she did not call for jointly-guaranteed eurobonds – instruments which Italian PM Mario Monti again called for as his favoured solution to the crisis.

“It is important to stress again that we have created the instruments for support in the Eurozone and that Germany is ready to use these instruments whenever it may prove necessary,” Merkel said, referring to the European Financial Stability Facility, and to its permanent successor, the European Stability Mechanism.

She also called for further steps towards closer political union, including a banking union – though the German Chancellor said that will take time.

However, Monti insisted eurobonds should “remain on the table” and should be adopted in “a not very long time.”

The instruments would be guaranteed by all Eurozone nations – thus giving weak governments the backing of Germany.

Monti hopes this would bring down borrowing costs for governments like Italy’s and Spain’s, but Merkel opposes the plan as it would undermine the countries’ incentives to reform their economies and restore competitiveness and growth in the long-run.

Meanwhile Cameron again called for “urgent action” to solve the crisis, explaining the fiscal compact, which will limit budget deficits, is not enough by itself to restore prosperity.

Specifically, he said more bank recapitalisations are needed, as well as a larger firewall to stop contagion spreading from Greece to other nations.