June 4, 2012
LONDON — As Spain’s economic crisis deepens and uncertainty swirls over Greece’s future in the euro zone, the guardians of the increasingly fragile European monetary union are near a moment of truth: can they muster the will and resources to keep the euro zone from breaking apart?
The question has grown more urgent since the release of data Friday showing a record-high rate of unemployment in the euro zone, poor job creation in the United States and a slowdown in manufacturing in China. Combined, those signals have fueled fears of a second worldwide recession.
On consecutive days last week, two of the most powerful figures in Europe — Mario Draghi, president of the European Central Bank, and Olli Rehn, the most senior economic official in Brussels — warned that the future of the euro zone was in doubt. In the words of Mr. Rehn, the union might well disintegrate unless policy makers take steps to bind the 17 European Union nations that use the euro closer together.
Coming as they did from two men at the very soul of the European project, the cautions were a stark reminder of just how much the Spanish financial crisis had shaken the confidence of the European brain trust, to say nothing of investors from New York to Beijing.
Over the weekend, leaders of two of Europe’s most vulnerable countries rallied to the cry of more unification. Mario Monti of Italy called for using euro bonds to create a quicker path to common debt for Europe. And Mariano Rajoy of Spain floated the idea of a common fiscal authority in Europe to synchronize budgets and manage debts.
German policy makers have said that kind of deeper budget integration and supervision is a prerequisite before any sort of euro bonds could be issued. Chancellor Angela Merkel of Germany called last week for a plan to give more power and competencies to the European Commission in Brussels, but through treaty changes as part of a five- or even 10-year process.