European finance ministers gathered in Brussels Tuesday in another effort to resolve the continent’s debt crisis and save the euro as its common currency.
The ministers appeared set to negotiate terms of proposals that would have until recently been unthinkable. They could force the 17 countries that use the euro to cede control of their sovereign spending to a central authority.
An elite group of financially stable European countries, including Germany and France, could also guarantee each other’s debts to cut some of their borrowing costs. But that would further isolate Europe’s debt-ridden countries.
Fears for the euro’s survival intensified as borrowing costs for debt-plagued Italy, the Eurozone’s third largest economy, shot to the highest point since the 1999 advent of the currency.
Italy was forced to pay nearly 8 percent interest on a three-year bond, well above the 7 percent threshold that forced Greece, Ireland and Portugal to secure international bailouts in the last year and a half.
Meanwhile, Britain, with a large economy and its own currency, cut projections for the growth of its economy this year and next. Chancellor of the Exchequer George Osborne said the country’s budget deficit will be worse than originally predicted, and that more spending cuts will be needed.
As Europe’s debt crisis has worsened, some analysts and European officials have acknowledged that the monetary union could collapse, or that weaker governments could leave the bloc.
That also could trigger a worldwide recession, leading to new economic difficulties for the United States, the world’s largest economy.
Polish Foreign Minister Radek Sikorski said a Eurozone collapse would be apocalyptic.
The Organization for Economic Cooperation and Development said Monday that the European Central Bank needs to sharply increase its purchase of bonds from European governments to cut their borrowing costs and ease their funding problems.
But Germany has adamantly opposed an increased role for the continent’s central bank, saying that some countries, like Germany, would then lose their top credit ratings.