Chancellor Angela Merkel rebuffed pressure on Thursday for Germany,
Europe's most powerful economy, to underwrite debt or guarantee bank
deposits in the euro zone as Spain's soaring borrowing costs raised new
alarm.
Spain's 10-year bond yield hit a euro lifetime high of 7 percent - a staging post above which Greece, Ireland and Portugal were driven to seek international rescues - despite last weekend's euro zone agreement to lend Madrid up to 100 billion euros ($125 billion) to recapitalise ailing banks.
Moody's Investor Service slashed Spain's sovereign credit rating by three notches to Baa3, just one level above junk, late on Wednesday, adding to the sense of emergency in financial markets ahead of an election in debt-plagued Greece on Sunday.
Merkel, addressing parliament in Berlin, rejected "miracle solutions" such as issuing joint euro bonds or creating a Europe-wide deposit guarantee scheme, backed by other leaders such as new French President Francois Hollande and Italian Prime Minister Mario Monti.
Such proposals were "counterproductive" and would violate the German constitution, she said.
Instead, she called for gradual steps towards the "Herculean task" of building a European political union.
"It is our task today to make up for what was not done (when the euro was created in 1999) and to end the vicious circle of ever new debt, of not sticking to the rules," Merkel said.
Read more: http://www.reuters.com/article/2012/06/14/eurozone-idUSL5E8HE4H320120614
Spain's 10-year bond yield hit a euro lifetime high of 7 percent - a staging post above which Greece, Ireland and Portugal were driven to seek international rescues - despite last weekend's euro zone agreement to lend Madrid up to 100 billion euros ($125 billion) to recapitalise ailing banks.
Moody's Investor Service slashed Spain's sovereign credit rating by three notches to Baa3, just one level above junk, late on Wednesday, adding to the sense of emergency in financial markets ahead of an election in debt-plagued Greece on Sunday.
Merkel, addressing parliament in Berlin, rejected "miracle solutions" such as issuing joint euro bonds or creating a Europe-wide deposit guarantee scheme, backed by other leaders such as new French President Francois Hollande and Italian Prime Minister Mario Monti.
Such proposals were "counterproductive" and would violate the German constitution, she said.
Instead, she called for gradual steps towards the "Herculean task" of building a European political union.
"It is our task today to make up for what was not done (when the euro was created in 1999) and to end the vicious circle of ever new debt, of not sticking to the rules," Merkel said.
Read more: http://www.reuters.com/article/2012/06/14/eurozone-idUSL5E8HE4H320120614
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