German leader rallies support for euro rescue

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REPORTING FROM LONDON -- With zero hour approaching for a ‘grand plan’ to save the euro, Chancellor Angela Merkel of Germany told fellow lawmakers Wednesday that the world was looking to their country to step up to the responsibility of helping guarantee Europe’s continued stability and prosperity.

Merkel called on the Bundestag to send her to Brussels for a crucial summit Wednesday evening with their clear backing for a solution to the debt crisis that threatens the global economy.

She said that despite the risks involved, Europe’s $600-billion bailout fund would have to be leveraged to a size capable of dealing with big, debt-ridden economies such as Italy and Spain.

‘We have to take the risk,’ Merkel said. ‘There’s no better alternative.’

Yet even as she spoke, there continued to be speculation that Wednesday’s summit in Brussels would fail to reach an agreement on the measures necessary to contain the debt crisis: a ramped-up bailout fund, a plan to recapitalize banks and a reduction in Greece’s staggering debt burden.

Analysts warn that if no credible plan is produced, the financial markets could be thrown into heavy turmoil and a return to global recession could loom larger.

Many eyes are also focused on Italian Prime Minister Silvio Berlusconi, whose government was on the brink of collapse this week over economic reforms demanded of him by the EU but resisted by his governing partners. On Tuesday, he and his coalition ally, the Northern League, announced that they had come to a compromise on raising Italy’s retirement age and that he would attend the summit in Brussels with a letter outlining a plan to cut public spending, reduce public debt and make Italy more competitive.

Berlusconi’s government has denied reports that, in order to secure the compromise with the Northern League, he was forced to agree to step down as premier in a few months and call early elections. But there is no doubt that Berlusconi has been severely weakened politically in recent weeks.

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-- Henry Chu