German Chancellor Angela Merkel has warned for the first time that her country could abandon the euro if she fails in her contested campaign to establish a new regime for the single currency, the Guardian has learned.
During a bad-tempered exchange at an EU summit dinner in Brussels at the end of October, Merkel responded to criticism from Greek Prime Minister George Papandreou by warning: “If this is the sort of club the euro is becoming, perhaps Germany should leave,” according to European government figures who attended the dinner.
The incident appears to underline the fraught political atmosphere among leading European politicians as they struggle to get to grips with the market onslaught on the euro, which has steadily mounted since Greece in May and then Ireland needed to be bailed out by the 16 eurozone countries, with Germany in the lead.
It was previously known that European Central Bank President Jean-Claude Trichet had attacked Merkel at the summit dinner on Oct. 28 because of her insistence that eurozone bailouts would need to include losses for the bond markets.
However, French President Nicolas Sarkozy criticized Trichet, a fellow Frenchman, at the dinner and strongly backed Merkel. Participants said that the French leader gave Merkel “vigorous and occasionally brutal support.”
Merkel’s central aim at the summit, successfully achieved, was to secure agreement on reopening the Lisbon treaty in order to establish a permanent system of bailout funding and investor losses to deal with the sovereign debt crises that have laid Greece and Ireland low this year and are threatening Portugal and Spain.
The Germans also want any country being bailed out to forfeit its voting rights in EU councils.
Papandreou told Merkel this was “undemocratic,” witnesses said.
The chancellor responded with the warning about abandoning the euro, an option seen as extremely improbable.
Ten months into the euro’s fight for survival, Germany, more than ever, is the key to winning the battle with the bond markets, which have been betting against the weak links —Greece, Ireland and Portugal.
Merkel’s spokesman, Steffen Seibert, would not comment on Friday on the chancellor’s private remarks to EU leaders.
However, the threat to quit the euro was “not plausible,” Seibert said, adding that: “Germany is unconditionally and resolutely committed to the euro.”
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