German Chancellor Warns Financial Crisis Solution Will Take Years

German Chancellor Warns Financial Crisis Solution Will Take Years
Diane Alter

Berlin, Germany

German Chancellor Angela Merkel has pushed for stronger rules against overspending as the long-term answer to Europe's debt crisis and says the fixes for the eurozone's flaws must be written into changes in the basic EU treaty.

The German leader laid out her stance while speaking to lawmakers in Parliament Friday ahead of a crucial European summit next week. Merkel stressed the need for tougher rules against running up debt, and said the process could take years to have an effect.

The long term changes Merkel insists upon, with the support of French President Nicolas Sarkozy, are viewed as just one half of new efforts by European leaders to rein in the debt crisis that erupted two years ago in Greece.

The other half is a short-term fix from the European Central Bank (ECB) for heavily debt-ridden governments such as Italy.

The prospect of more ECB help has given markets a boost, along with coordinated steps outlined Wednesday by central banks to improve liquidity to commercial banks and allow them to borrow U.S. dollars to fund operations.

Rising borrowing costs fueled by fears of default led Greece, Ireland and Portugal to seek bailout loans from other eurozone governments and the International Monetary Fund.

To ensure that euro nations are keeping their budgets in check with the limits of the stability pact (deficits of not more than 3 percent of gross domestic product and government debt of nor more than 60 percent of GDP), Germany is pushing for the right to take countries in violation before the European Court of Justice.

While EU members continue to agree to disagree on key issues, they all concur that there is no quick fix to Europe's financial woes.