Ambush from Italy and Spain forces Angela Merkel to dilute euro deal
Angela Merkel was forced into a humiliating about-turn after being ambushed at a European Union summit by a new Latin alliance of France, Italy and Spain.
Angela Merkel, the German Chancellor, was forced into the humiliating about-turn after being ambushed at a European Union summit by a new Latin alliance of France, Italy and Spain.
Italy and Spain — with French support — plunged talks on the euro’s future into disarray by threatening to block any deal unless Germany and other northern European nations backed their demands for easy access to bail-out funds. Mario Monti, the Italian prime minister, celebrated the agreement as a “very important deal for the future of the EU and the eurozone”. He could not resist reminding Mrs Merkel that as well as winning at the summit, Italy had also won on the pitch, defeating Germany to win a place in the Euro 2012 finals. “It’s a double satisfaction for Italy,” he said.
The concessions for Italy and Spain will make it easier for countries facing high interest rates on the debt markets to draw on eurozone bail-out funds to buy bonds or directly recapitalise banks without adding to government balance sheets.
Heading into the summit on Thursday afternoon, Mrs Merkel accused Italy and Spain of hysteria while rejecting both bond buy-back and bank recapitalisation options, saying they would dilute tough conditions for eurozone aid....