German Chancellor Angela Merkel, while guarded, said her country – the European Union’s biggest economy – doesn’t want the bloc’ worst-hit countries to become insolvent, and said it is also willing to help shore up the beleaguered International Monetary Fund (IMF.) Her remarks came after her Finance Minister, Peer Steinbreuck, said Germany would take actions to protect the Eurozone if one of its 16 member states found itself unable to refinance its debt. She hedged her bets, however, saying under some circumstances that Germany would not present a blank cheque to the EU’s most economically-troubled members, particularly those in central and Eastern Europe. At a joint press conference with visiting European Commission President Jose Manuel Barroso, Merkel said: “I will not allow Germany to participate in any speculation.”

While the falling fortunes of some EU countries made the Euro fall to nearly 1.25 to the dollar, a hard drop in a short time, she said the Eurozone is still strong now and has proven itself in this world economic crisis and stressed the importance of looking beyond the current crisis and learning lessons from it. Amid rising hopes that the German government will lead European Union efforts to support troubled economies in Central and Eastern Europe, she said, “Germany will not refuse to (financially) support the IMF if necessary,” she said. Merkel also praised the region participating in the single currency as “strong” and said it “has proven its worth in the crisis.”

However, she reportedly declined to say whether Germany, with the largest economy in Europe, would come to the aid of Eurozone nations under severe fiscal stress. Steinbrueck had dismissed as “absurd” any speculation that fiscal strains within the euro zone could lead to an exit by any of the single currency’s 16 members and said Eurozone countries would likely have to come to the aid of other troubled members.The consequences of a Eurozone breakup would be too far-reaching, Steinbrueck said, according to Dow Jones Newswires.” Could you imagine anyone would be wiling to put up with this?” he said.

His remarks followed a further widening of government bond yield spreads, with markets demanding a higher premium for lending to governments such as Ireland that are under severe fiscal strain. The cost of insuring against default on sovereign debt issued by Ireland soared to record levels in recent days. Germany has the best credit rating in the European Union, while some other Eurozone countries, such as Ireland and Greece were trapped into bad credit rating as a result of the world economic crisis, European Commission officials said. Her sharp tone came as she was preparing to host the EU’s economic leaders in Berlin on February 22 for a mini-summit amid fears of a financial short-circuiting of the markets, particularly in central and Eastern Europe, which have been the hardest hit so far.

EU’S DECLINE AND FALL

The meeting was aimed at finding yet further ways of combating the financial crisis and the near-depression that continues to grip the world, putting banks and businesses on the edge of bankruptcy everywhere, despite trillions of dollars, Euro, yen, pounds, and most every other major currency being poured into round after round of bail-outs that haven’t worked yet. What’s most worrying the EU now though is a fall in the Euro caused by sell-offs in markets across the so-called CEE states in central Europe, particularly because banks there and those elsewhere in the EU who have supported them, such as Austria and the Czech Republic. That has EU leaders scrambling to find ways to shore up financial systems in the CEE.

That was likely to mean better coordination between key international institutions such as the IMF and the European Bank for Reconstruction and Development, although some analysts and economists said they believe that crumbling economic growth, escalating unemployment, rising budget deficits and falling foreign investment could trigger further turmoil on CEE financial markets and result in another round of falls in currencies and shares. Five years ago, the EU added 10 new members, including those now most affected by the relentless crisis. For a few years, some of those countries, such as the Baltics, were referred to as economic tigers because of near double-digit growth and what seemed like a rapid rise from former Communist satellites to capitalist success stories.

But now they are on the brink of collapse and have already taken one government with them as the prime minister of Latvia resigned as his country’s economy fell into the gutter, a prime candidate for what Merkel hopes will not be a Eurozone bail-out to go along with those for banks and auto industries. Indeed, another round of indicators released February 20 pointed to the economic downturn gaining momentum across Europe with confidence in the 16-member Eurozone manufacturing and services sector slumping. Business confidence in France plummeted to its lowest level in more than 40 years, a survey showed. Among factors under consideration are steps to strengthen global financial accountability and disclosure measures as well as moves to monitor all major cross- border financial institutions, including the creation of new financial market watchdogs to be called college of supervisors.