Mario Draghi, Mario Monti demand bolder steps to end EU crisis

BRUSSELS: German Chancellor Angela Merkel was besieged by critics for letting the euro crisis smolder, with the leaders of Italy and the European Central Bank demanding bolder steps to stabilise the 17-nation economy.

Italian Prime Minister Mario Monti and ECB President Mario Draghi pushed Germany to give up its opposition to direct euro- area aid for struggling banks. Monti further antagonised Germany by urging a road map to common borrowing.

Calling himself a devotee of German-style budgetary rigor, Monti told a Brussels conference on Thursday that Merkel's vision of a stable economy "risks being undermined because of lack of promptness in setting up the necessary instruments to limit the contagion."

Financial markets offered a snapshot of Europe's stresses after more than two years of crisis, with the euro close to its weakest in two years against the dollar. Investors sent yields on French and German debt to record lows as they sought shelter from the market mayhem afflicting Italy and Spain.

European Commission proposals on Wednesday for European- financed bank recapitalizations and a timetable for euro bonds met with rejection in Germany, Europe's biggest economy and the chief underwriter of 386 billion euros ($477 billion) in aid offered since 2010.

Merkel put some nuance into the German position on Thursday. While promising "no taboos" in attacking the crisis, she floated a timeline of "five to 10 years" for fixing flaws in a currency shared by countries with divergent wealth and attitudes toward taxing and spending.

Merkel lost her chief crisis-fighting ally this month when French President Nicolas Sarkozy was defeated by Francois Hollande, a Socialist who challenged the pro-austerity doctrine and called for a more activist central bank.

Monti joined Hollande in cornering Merkel in a conference call on Wednesday with US President Barack Obama, who has criticised Europe for failing to get to grips with the crisis. The four-way call addressed "developments in Europe," the White House said in a statement.

Merkel's international isolation goes along with a state of political siege at home after her party was routed in elections in Germany's largest state. In office since 2005, she is one of only five euro-area leaders to hold on to power since the crisis broke out.