German Foreign Minister Guido Westerwelle said progress made this month on European bailout funding and central-bank intervention may prove to be the turning point in tackling the debt crisis in the euro zone.
Westerwelle cited Germany’s Federal Constitutional Court decision freeing the way to the permanent bailout fund, the European Central Bank’s plan to lower bond yields and election victory for pro-European parties in the Netherlands as events that point to success in wresting control of the crisis almost three years after it surfaced in Greece.
“Taken together, it could be that we look back on September 2012 as the month of the turning point in the European debt crisis,” Westerwelle said at a conference today in Berlin. “We haven’t overcome the crisis yet, but these signs are a silver lining on the horizon.”
A market rally last week on the back of the September breakthroughs raised the prospect of taming the debt crisis, though the surge was restrained by policy disagreement as finance ministers squabbled over a more unified banking system at a weekend meeting and Spanish Prime Minister Mariano Rajoy stalled over whether to request more international aid.
Westerwelle lauded Ireland’s return to the markets, Portugal’s budget surplus and Greece’s receding deficit as examples of crisis-fighting measures taking hold. Missing from the list was Spain, which is considering requesting bailout assistance after already securing 100 billion euros ($131 billion) to prop up its sagging banking sector.
The German foreign minister and his Polish counterpart, Radoslaw Sikorski, sought to build momentum with a raft of proposals to fight the crisis and establish the European Union as a stronger global power. Creating a European monetary fund and electing a European president were part of their plan.
“Budgetary discipline is key” to strengthening the 17-nation shared currency and a system “to ensure that all member states abide by the rules is essential,” Westerwelle and Sikorski wrote today in an op-ed published in the International Herald Tribune.
“Containing the crisis is our responsibility,” they said. “And we will deliver on it. But beyond that our ambition is to ensure that Europe plays a global role that corresponds to its economic power.” That includes not “shying away from military capabilities.”
The euro area’s permanent financial-rescue fund, the European Stability Mechanism, should be further developed into a European Monetary Fund, the ministers said. Westerwelle said the region had to rely less on the International Monetary Fund, which effectively diverts financing from poorer countries.
The op-ed contained the conclusions of meetings this year by the foreign ministers of Belgium, Denmark, France, the Netherlands, Italy, Luxembourg, Austria, Poland, Portugal and Spain, according to the statement.
Poland backs Germany in slowing a timetable for a so-called banking union, against countries including France, Italy and Spain that support a European Commission plan to begin joint banking supervision at the beginning of the year.
German Chancellor Angela Merkel has reached out to Poland as a partner in stemming the crisis, seeking to strengthen ties held back for decades by the legacy of the Nazi occupation of Poland during World War II and German death camps built on Polish soil to carry out the Holocaust.
“Our two countries have become very close” and Poland’s post-communist economic overhaul in the 1990s is a model for euro-area countries such as Greece by showing that “as painful as the efforts were, they paid off,” Merkel said at a ceremony honoring Polish Prime Minister Donald Tusk in Berlin on May 31.