Identity crisis

German Chancellor Angela Merkel addressed parliament on Wednesday to defend a new eurozone rescue system and again advocate stricter regulation of the financial sector. She told lawmakers that the eurozone is facing an "existential test, which it must pass."

The lower house or the German parliament, the Bundestag, convened to consider a proposed rescue fund worth up to 750 billion euros (about $950 billion), which eurozone nations want to set aside ready to help member states avoid defaulting on their debts.

"It is about nothing less than the defense of the European idea," Merkel said in Berlin, to mixed response. "If the euro fails, then Europe fails."

Germany could contribute up to 148 billion euros to the package, which would also be supported by the International Monetary Fund and the European Union.

A similar, smaller package was recently introduced to help Greece meet its soaring debts, with the first installment from eurozone countries delivered to Athens on Tuesday.

The Bundestag will vote on the proposal for a general rescue fund on Friday.

Not just Greece

Merkel said government overspending was not unique to Greece, and described the widespread practice as "the real cause" of the sharp drop in the value of the euro.

"By the way, even we Germans have been taking out loans, not since yesterday, but for the past 40 years," Merkel said. "We are living on borrowed money as well."

She said eurozone members should quickly reduce annual budget deficits and total national debts, so that the euro currency can begin to stabilize.

The chancellor also defended the newly imposed regulation banning the naked short selling of bonds issued by governments of countries in the eurozone, a practice that helped bring the Greek debt crisis to a head faster than initially expected.

She advocated stricter regulation of the financial sector, including her proposed tax on stock market transactions.

Questions from the opposition

Opposition parties, while acknowledging that the eurozone is facing financial difficulties, questioned the approach employed by Merkel's government.

The leader of the Social Democrat parliamentary group, Frank-Walter Steinmeier, urged Merkel to commit to financial market regulations, even if international partners opposed the move.

"Just providing a huge set of loans is not sufficient," he said. "For five weeks, you have done nothing, you have denied, and delayed," he told Merkel, accusing her of putting off the issue until after a crucial regional election in Germany's most populous state, North Rhine-Westphalia, earlier this month.

"That has driven us Europeans a great step further into crisis," he said. Fears about the solvency on the eurozone have led to increased speculation on the financial markets, with the euro currency hovering around a four-year low against the dollar all week.

msh/AFP/apn/dpa/Reuters
Editor: Ben Knight