Our Toughest Hour since WWII, by Angela Merkel

Article excerpt

Byline: Ian Carey

THE eurozone crisis reached a new pitch yesterday as Chancellor Angela Merkel admitted Europe faces its toughest challenge since the Second World War.

The German leader said for the first time that if the single currency fails, Europe will fail - and she pledged to do 'anything' to stop that happening.

However, she offered no new ideas to halt the slide and her remarks came as attempts to create emergency governments in Greece and Italy ran into severe difficulties.

As Mario Monti attempted to put together a unity coalition to force through tough austerity measures in Italy, the cost of the country's debt continued to rise, peaking at 6.29 per cent. A level of 7 per cent is regarded as unsustainable.

In Greece, opposition leader Antonis Samaras refused to sign up for any new belt-tightening, claiming the current measures demanded by the EU and IMF do not do enough to promote growth.

The panic also spread to Spain, which traders believe will follow Italy into 'bailout territory'.

The country's bond yields - the interest rate it has to pay on its debt - hit 6 per cent for the first time in three months.

Miss Merkel told her conservative party in Leipzig: 'Europe is in one of its toughest, perhaps the toughest hour since World War Two.' But in a one-hour address to the Christian Democrats, she offered no new ideas for resolving the crisis.

Worryingly for Ireland, her finance minister yesterday reiterated Germany's intention to see eurozone countries push through a common fiscal policy by the end of 2012.

He added that he would prefer all 27 members of the European Union to sign up to the treaty change, but conceded that some non-euro members had already signalled their resistance to such changes. Britain has already indicated it opposes changes to the Lisbon Treaty.

Wolfgang Schauble called for increased central control and monitoring of countries' budgets. 'This is what we're aiming for,' he said.

Such a change would mean altering the Lisbon Treaty, which would require a referendum here.

The minister also said it would make sense to introduce the eurozone's permanent rescue facility, the European Stability Mechanism, before the middle of 2013, as planned, but admitted this would be hard because of the approval required in all 17 eurozone parliaments. …