Merkel tries to calm storms over Greece, ECB policy

Sun Aug 26, 2012 2:28pm EDT
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By Noah Barkin and Paul Carrel

BERLIN/FRANKFURT (Reuters) - Angela Merkel tried to calm a growing storm over euro zone crisis strategy on Sunday after the Bundesbank likened ECB bond-buying plans to a dangerous drug and a conservative ally of the German leader said Greece should leave the currency bloc by next year.

The comments, from central bank chief Jens Weidmann and a senior figure in the Bavarian Christian Social Union (CSU), Alexander Dobrindt, point to mounting unease in Germany with the policies being used to combat the three-year old debt crisis.

Domestic criticism has narrowed Merkel's room for maneuver at a time when Greece is in dire need of more aid and policymakers are scrambling to prevent contagion from enveloping big countries like Spain and Italy.

Two days after Greek Prime Minister Antonis Samaras visited Berlin and made an impassioned plea for politicians there not to talk up the possibility of a Greek euro exit, Merkel herself sent a warning to allies who have said the euro zone would be better off without its weakest link.

"We are in a very decisive phase in combating the euro debt crisis," Merkel told public broadcaster ARD in an interview. "My plea is that everyone weigh their words very carefully."

Dobrindt, whose party is preparing for a regional election in Bavaria and the federal vote next autumn, told top-selling German daily Bild he expected Greece to leave the euro zone in 2013. His comments drew a swift rebuke from Foreign Minister Guido Westerwelle who said "bullying" of euro members must stop.

In addition to Greece, policymakers have been sparring over European Central Bank President Mario Draghi's plans to buy up the bonds of Spain and Italy.

The ECB is assuming a greater role in the crisis while governments negotiate legal and political hurdles to coordinating a longer-term response. The bank's Italian head is expected to detail his plans after a September 6 meeting of its 23-member governing council.   Continued...

German Chancellor Angela Merkel poses for photographers after the television recording of the "ARD Sommerinterview" in Berlin August 26, 2012. REUTERS/Tobias Schwarz