German Chancellor Angela Merkel says the eurozone’s financial problems may be Europe’s biggest crisis since World War Two. She called for closer political ties among European nations, and overhauling the European Union’s treaties to meet the challenge.
On Monday, Ms. Merkel told party members that a united Europe could fail if the 17-nation eurozone that uses a common currency breaks up over debt problems in Greece, Italy and other nations. Germany is Europe’s strongest economy, and the chancellor’s comments came as new leaders in Italy and Greece try to cope with massive debt and slow growth that could hurt the eurozone’s economy.
Italy was able to borrow more than $4 billion in a new bond sale Monday. The interest rate was the highest since 1997, but analysts said the good response to the sale and gains in Asian stock markets show growing investor confidence in Italy since economist Mario Monti was named to be prime minister.
Mr. Monti said Sunday he will work quickly to form a new government for the eurozone’s third largest economy. The prime minister-designate must present the names of his Cabinet ministers to Italian President Giorgio Napolitano before he can be sworn in. He is expected to announce his choices Monday.
A former European Union competition commissioner, Mr. Monti received support for the top job from major opposition parties and some members of former prime minister Silvio Berlusconi’s ruling center-right PDL party.
Mr. Monti has never held elected office in Italy and does not represent any Italian political party. He would lead the country until the next elections, due by 2013.
The new government faces the challenge of implementing a major austerity package recently approved by parliament to cut the country’s huge public debt. EU leaders called Mr. Monti’s appointment an “encouraging sign,” but they promised to carefully watch the situation in Italy.
EU leaders have been pressuring Italy to cut public spending to avoid becoming the latest eurozone member to request a bailout. EU officials worry that the Italian economy is too big to be rescued, and they fear its demise would seriously hurt the euro.