Europe—All Eyes on the Dragon

John Thys/AFP/Getty Images

Europe—All Eyes on the Dragon

Pressure builds on the European Central Bank president as euro contagion widens.

Barely two weeks have elapsed since Mario “the dragon” Draghi took office as head of the world’s largest central bank. Financial markets remain fixated on the spreading contagion of the euro crisis. Reports indicate the contagion is worsening by the hour. The fears are that unless Draghi steps in soon to use the European Central Bank’s (ecb’s) clout to stem the free fall of major European economies, the whole world will enter a period of extreme financial chaos.

Yet once again it is Germany that is the thorn in the side of those clamoring to have the ecb exercise the power of lender of last resort to embattled eurozone members.

With fears that France will follow Spain as the next major EU economy at risk, French government spokeswoman Valerie Pecresse stated Wednesday that “The ecb’s role is to ensure the stability of the euro, but also the financial stability of Europe. We trust that the ecb will take the necessary measures to ensure financial stability in Europe.”

However, Germany’s Chancellor Angela Merkel is holding out against ecb intervention. Pointing out that EU regulations prohibit such action by the ecb (not that EU rules have ever stopped Germany from breaking them in the past), she is pushing for yet another treaty change to force structural economic reforms on the EU and “build a closer European political union” (Reuters, November 16).

On past performances, Germany will have its way. Yet, as Robert Morley indicates in his column this week, this is a high-risk gamble playing for the highest of stakes.

ecb chief Mario Draghi has a reputation as a master poker player in the high-stakes game of global economics and finance. He is the man of the moment upon whom all eyes are fixed to watch for the slightest feint, being not only the game’s main banker, but also the holder of the winning hand. It’s now up to Draghi to see if he has the mettle to play his cards right such that Rome and Berlin come out the winners.

With the deck stacked against it, France is finally being forced onto the back foot as lackey with cap in hand, totally subject to the German chancellor’s diktat. The longer Draghi holds out, the greater the risk of the traditional link between the EU’s two leading members being fractured.

We have for long wondered what it would take to push France off its perch, having deliberately linked itself so closely to Germany out of fear of giving any latitude to its old northern enemy to revive its imperial designs.

Now it is obvious that France will be brought to its knees begging for bailout, to become a mere subservient lackey to the whims of Berlin and Rome.

Veil the Franco-German dream of European Union. Hail the rising imperial German Reich.