Merkel: Full Political Union Is the Only Way to Save the Euro
Byline: Russell Lynch
GERMAN Chancellor Angela Merkel tightened her grip on Europe today as she warned that a convincing solution to the region's sovereign debt crisis would mean full-scale political union.
Keeping all 17 nations in the single currency would "require a fundamental change in our whole policy" to soothe turbulent debt markets, she said.
"I believe it is important for those who buy government bonds: that we make it clear we want more Europe step-by-step -- that is the European Union and the euro area grows together, otherwise people won't believe we can really get a handle on our problems."
To boost investor confidence, Merkel wants to establish a fiscal union and then "turn it step-by-step into a political union".
Her comments echo previous calls for a central, eurozone treasury with the powers to keep much closer tabs on the finances of member states.
Germany is effectively underwriting the bailouts of strugglers like Greece, Ireland and Portugal which has been deeply unpopular with its taxpayers.
But the boldest call yet for political union from Europe's economic powerhouse is also likely to raise fresh fears over a loss of sovereignty on the region's periphery.
Italy and Greece have new, unelected governments under technocrats Mario Monti and Lucas Papademos after previous leaders Silvio Berlusconi and George Papandreou were unseated by a bond market rout and fears over the unsustainable finances of both nations. Investec Corporate Treasury analyst Lee McDarby said momentum behind closer intergration was gathering pace: "The focus is clearly moving towards structural reforms rather than a few weeks ago when European leaders were concentrating on the sticking plaster -- bank recapitalisations and boosting the bailout pot."
Commonly-issued European debt -- so-called "eurobonds" -- has been mooted as a lasting solution to the eurozone crisis, although this would put up the borrowing costs of Germany and France and both nations are opposed to the plans without much deeper integration. …