Thursday, May 31, 2012

Deepening crisis forces Merkel to re-examine euro taboos

May 31, 2012

How far is Germany prepared to go to save the euro zone?

With Greece's future in the single currency bloc in doubt, Spain scrambling to get a grip on its ailing banks and the euro itself in freefall, the question that has preoccupied crisis watchers for over two years is back in focus like never before.

As in previous "crunch" moments during the crisis, coming up with a clear picture of Berlin's intentions is difficult.

Chancellor Angela Merkel, who has looked increasingly isolated since the victory of Socialist Francois Hollande in France's presidential vote, is keeping her cards close to her chest in the run-up to a pivotal EU summit one month from now.

Much will depend on the outcome of Greece's June 17 election, where a victory for the radical-left could catapult the bloc into an even deeper abyss, forcing Merkel and her partners to decide whether they can cope with a Greek exit and the contagion that would bring.

But amid the uncertainty, Merkel and her advisers have sent out signals that help to decrypt which of Berlin's "red lines" in fighting the crisis are truly red, and where Europe's reluctant paymaster may show flexibility in the crucial weeks to come.


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