German Chancellor Angela Merkel called for the development of a mechanism that would allow for an orderly insolvency of EU member states. She also urged new disciplinary mechanisms be created to ensure that EU member states meet their fiscal deficit targets.
News HeadlinesRecommending tough moves against "notorious deficit sinners" in the euro zone, such as withdrawing voting rights, the German leader told parliament in Berlin: "Above all, what's necessary is to develop a process for an orderly state insolvency.
"With that we would create an important incentive for euro zone member states to keep their budgets in order." Germany shocked financial markets on Tuesday by taking an apparently unilateral initiative involving an immediate ban on naked short-selling of euro government bonds and on related transactions in credit default swaps (CDS).