Saturday, June 23, 2012

Angela Merkel defies Latin Europe and the IMF on bond rescue

German Chancellor Angela Merkel has shot down calls for full mobilisation of the eurozone's bail-out funds to halt the raging bond crisis in Spain and Italy, ignoring unprecedented pleas for action from the International Monetary Fund.

"Each country wants to help but if I am going to call on taxpayers in Germany, I must have guarantees that all is under control. Responsibility and control go hand in hand," she said after a crucial summit of the eurozone's Big Four powers in Rome.

Mrs Merkel -- or La Signora No in Italy -- doused hopes of a break-through on proposals by the "Latin Bloc" leaders of Italy, France, and Spain to deploy the funds (EFSF and ESM) to cap the bond yields of "virtuous" countries vulnerable to contagion, or to recapitalize banks directly to take the strain off sovereign states.

"If I give money striaght to Spanish banks, I can't control what they do. That is how the treaties are written," she said, before racing off to Danzig to tonight for Euro 2012 quarter final between Greece and German..

Christine Lagarde, the head of the IMF, warned before the summit that the eurozone is under "acute stress" and at risk of a downward spiral. Read More