(Der Spiegel) Euro Zone Considers Solution of Last Resort

Posted by Kendall Harmon

Obama, at any rate, felt that they would have little value. Instead, he confronted the Germans in Cannes with a suggestion so radical that it alarmed both Merkel and Schäuble. To save the common currency, Obama proposed that the Europeans follow the example of the American Federal Reserve, which buys up almost unlimited amounts of US treasury bonds when necessary.

The Germans pointed out feebly that the ECB operates within a completely different tradition than the Fed, and that it also pursues a different mission. But it is becoming increasingly clear to Merkel and her finance minister that, in the end, only the ECB will be able to save the euro if the crisis continues to escalate. It is the only European fiscal policy institution capable of taking action, and it also comes equipped with unlimited firepower. It can never run out of money, because it can simply print new money when needed.

This is an approach Germany's representatives in the ECB council have strongly resisted....But how long can the Germans resist the pressure from other members?

Read it all.

Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsCurrency MarketsEuroEuropean Central BankThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--Foreign RelationsPolitics in General* International News & CommentaryEngland / UK--IrelandEurope--European Sovereign Debt Crisis of 2010FranceGermanyGreeceItalyPortugalSpain

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