Europe could be in worst hour since WW2: Merkel
By Noah Barkin and Stephen Brown
LEIPZIG, Germany (Reuters) - German Chancellor Angela Merkel said on Monday that Europe could be living through its toughest hour since World War Two as new leaders in Italy and Greece rushed to form governments and limit the damage from the euro zone debt crisis.
A rally on financial markets sparked by the appointment of respected European technocrats in Rome and Athens soon stalled. Analysts warned that daunting obstacles could hinder the decisive action needed to revive their ailing economies.
Italy had to pay a euro-lifetime record yield of 6.3 percent to sell five-year bonds with investors wary of buying its debt until prime minister-designate Mario Monti can undertake profound economic reforms.
In a first sign of trouble for new Greek Prime Minister Lucas Papademos, the leader of the main conservative party rejected any toughening of austerity and refused to sign a letter sought by European authorities pledging support for a new 130 billion euro bailout.
Merkel put the situation facing the euro zone into stark relief in an attempt to rally her conservative party behind the government at a congress in Leipzig.
"Europe is in one of its toughest, perhaps the toughest hour since World War Two," she told her Christian Democrats (CDU), saying she feared Europe would fail if the euro failed and vowing to do anything to stop this from happening.
In a one-hour address, Merkel called for closer European political union but offered no new ideas for resolving a crisis that has forced bailouts of Greece, Ireland and Portugal, raising fears about the survival of the 17-state currency zone.
European Union governments have until a summit on December 9 to come up with the outlines of a bolder and more convincing strategy, with some form of massive, visible financial backing. Continued...