The holiday is over. Angela Merkel yesterday returned to the fray at the end of a two-day trip to Canada, saying Germany and the European Central Bank are aligned in their approach to the euro crisis. For those expecting a shift in policy, this may not appear to be much of a watershed: the two have been aligned throughout the crisis, much to the frustration of euro members to the south. So what is different? Now Germany and the ECB appear to be shifting their position toward accepting that the central bank should purchase bonds of the most indebted euro members — so they are aligned, as Merkel says and as they have been in the past, but on a slightly more lenient approach to the crisis.
Merkel repeated certain of the new catchphrases, such as saying policymakers are “committed to do everything we can to maintain the common currency,” as Tony Czuczka and Patrick Donahue report. And she now says that a return to sovereign-bond buying by the ECB would clearly be based on a series of conditions agreed with the countries involved. This is a much softer stance compared with earlier in the year, when austerity was the key word rather than conditionality.
Indeed, conditionality is such a soft term it could mean anything – and probably will mean different things for different countries. It suggests Merkel’s new position is one of negotiation on how the ECB intervenes more deeply in the crisis rather than one of blocking such a move and insisting national governments take all the initiatives, which has been her stance up until now. This shift may turn out to be quite a watershed in the debt crisis – once the rest of the euro-zone leaders manage to make it back from their vacations.