Germany faces mounting pressure to let the European Central Bank (ECB) save the euro, as France fretted on reports of IMF contingency bailout planning for a re-modelled Italy.
With bond market vultures circling even gold-plated economies and Italy’s La Stampa daily citing IMF officials on a rescue plan worth up to €600 billion, another of Germany’s closest allies broke ranks, leaving Berlin isolated.
Amid predictions that the common currency faces its death throes within weeks failing radical intervention, Austria joined Finland in backing ECB action to stem the financial market contagion threatening Italy, Spain and even France.
The pressure has intensified since Germany itself struggled to raise public finance on commercial money markets last week.
“The European Central Bank could perform a more powerful role, as in the United States,” the Austrian Prime Minister, Mr Werner Faymann, said, also giving his support to the creation of commonly-issued eurobonds.
“It could itself buy states’ bonds,” he said on the sidelines of a congress of European Socialist parties in Brussels.
Clearly the race is on to prevent interest rates for Italy or Spain from skyrocketing to the levels that forced Greece, Ireland and Portugal to accept multi-billion bailout EU-IMF loans.
The scope for direct ECB action at primary level, as long sought by the US, British and other G7 partners among the world’s most powerful economies, will be the unspoken nub of euro finance ministers’ talks night in Brussels.
The Finland’s Finance Minister, Mr Jutta Urpilainen, said Friday: “I think we have seen that if there is nothing else left then we can think about strengthening the role of the ECB.”
In Strasbourg last week for a mini-summit with France and Italy, the German Chancellor, Ms Angela Merkel, said politicians should not intervene in ECB decision-making.