Germany is facing a moment of strategic truth. The sacred union with France that has held together through thick and thin for half a century is in growing danger as contagion spreads North, engulfing the French bond market.
By Ambrose Evans-Pritchard, International business editor
The Telegraph, UK
9:29PM GMT 16 Nov 2011
For EU veterans, the drama has has echoes of 1993 when the Bundesbank ditched orthodoxy to rescue France, after first cutting Britain and Italy adrift in the Exchange Rate Mechanism. But this time the stakes are much higher.
On that occasion, Chancellor Helmut Kohl pulled rank, more of less ordering his bankers to obey. “We must always bow three times before the Tricoleur”, as he famously put it.
On Wednesday, France began to deploy its political leverage in earnest, leading an open revolt against Germany over the fire-fighting role of the European Central Bank.
The country’s budget minister Valérie Pécresse said the central bank had a greater duty to Europe’s citizens than mere adherence to its low inflation mandate. “The ECB’s role is to ensure the stability of the euro, but also the financial stability of Europe. We trust that the ECB will take the necessary measures,” she said. Finance minister François Baroin made near identical comments to Les Echos.
In what is clearly a co-ordinated move by top EU players, European Commission chief Jose Manuel Barroso said Europe is “facing a truly systemic crisis” that requires a condign response from all players in the unfolding drama. “Should the central bank be responsible for financial stability as well as price stability? My reply is yes, definitely.”
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- Germany’s Bitter Recipe Tests Euro Zone’s Solidarity (nytimes.com)
- Contagion tightens its grip on Europe (business.financialpost.com)
- You’ll Never Guess Which Country The Euro Crisis Has Already Spread To (businessinsider.com)