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Updated Wednesday, November 30, 2011 0:06 am TWN, By Don Melvin, AP

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EU desperate to stop a 'financial tsunami'

BRUSSELS--The 17 finance ministers of the countries that use the euro converged on EU headquarters Tuesday in a desperate bid to save their currency — and to protect Europe, the United States, Asia and the rest of the global economy from a debt-induced financial tsunami.

The ministers were discussing ideas that would have been taboo only recently, before things got as bad as they are: countries ceding fiscal sovereignty to a central authority; some kind of elite group of euro nations that would guarantee one another's loans — but require strong fiscal discipline from anyone wanting membership.

German Chancellor Angela Merkel reiterated her support for changes to Europe's current treaties in order to create a fiscal union, that will include binding and enforceable commitments by all euro countries.

“Our priority is to have the whole of the eurozone to be placed on a stronger treaty basis,” Merkel said Tuesday in Berlin. “This is what we have devoted all of our efforts to; this is what I'm concentrating on in all of the talks with my counterparts.”

Merkel acknowledged that changing the treaties — usually a lengthy procedure — won't be easy because not all of the European Unions 27 member states “are enthusiastic about it.” But she dismissed reports that the eurozone, or some nations within the bloc, might go ahead with a swifter treaty between governments.

Changes to existing eurozone rules are being touted as one way the eurozone can get out of its debt crisis, which has already forced bailouts of Greece, Ireland and Portugal, and is threatening to engulf bigger economies such as Italy, the eurozone's third-largest. If Italy were to default on its debts of around 1.9 trillion euros (US$2.5 trillion), the fallout could spell ruin for the euro project itself and send shockwaves throughout the global economy.

“I will probably be first Polish foreign minister in history to say so, but here it is,” Radek Sikorski said in Berlin. “I fear German power less than I am beginning to fear German inactivity. You have become Europe's indispensable nation.”

In a reminder of the urgency, Italy's borrowing rates shot up Tuesday to rates above 7 percent, an unsustainable level on a par with rates that forced the others to seek bailouts. Markets rose generally for the second day on the expectation that the enormous pressures on European ministers would produce results.

At the top of Tuesday's agenda is finding a means to more fully integrate the eurozone's disparate nations — ranging from powerful Germany to tiny Malta — both politically and financially. And the ministers must do it fast, without the delays caused by democratic niceties like referendums that have led many EU reforms to take years to implement.

France's finance minister, Francois Baroin, said Tuesday on France-Info radio that countries should integrate their budgets more closely and monitor one another's spending.

“We have to modify eurozone governance,” Baroin said. “We definitely have to move toward more integrated budgetary consolidation, fiscal convergence with our neighbors.”

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