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European Debt Crisis

Merkel likely to feel pressure at G8 summit

Stephen Beard May 18, 2012

David Brancaccio: The G8 summit of the world’s richest industrialized nation’s gets underway this evening at Camp David in Maryland. German Chancellor Angela Merkel could be the center of attention. She’s under pressure to get behind stimulus programs for Europe.

Marketplace’s Stephen takes a look at what this might look like.

Stephen Beard: The message from Berlin is now clear: We will not pour more cash into the black hole of Greek public spending on welfare and other services. But we will put more money in so long as it is spent on investment — on building bridges and roads and helping industry.

Sources in Berlin suggest the Germans would be prepared to contribute to a €200 billion investment fund, administered by the European Investment Bank.

Simon Tilford of the Centre for European reform is not impressed.

Simon Tilford: The problem is that the crisis is way beyond that point. A bit of additional spending from the European Investment Bank is not going to stop the rot; it’s not going to address what is now a systemic credibility problem.

He says the only way to stop the crisis now is to allow the European Central Bank to back all eurozone countries with unlimited funds. But that, he says, will be a very hard sell in Berlin.

In London I’m Stephen Beard for Marketplace.

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