As the European debt crisis continues to worsen with political chaos in Athens and Rome, talks about breaking up the official European Union (EU) have rumored to begun. Talks about the financial burden of Italy and the possible destruction of the EU may have taken place in Brussels; Germany and France were main parties to meet and discuss the issues. Collapse of investor confidence in the EU's third largest economy has sent interest rates in Italy soaring. The same interest rates were seen in Portugal, Greece and Ireland before those countries triggered massive bailouts. The Italian crisis phase has worsened as Italian bonds yield around 7 percent to 7.5 percent. Angela Merkel, the German chancellor, said the situation had become “unpleasant. It is time for a breakthrough to a new Europe,” she said. “Because the world is changing so much, we must be prepared to answer the challenges. That will mean more Europe, not less Europe.” The president of the European commission, José Manuel Barroso, stated “Europe must either transform itself or it will decline. We are in a defining moment where we either unite or face irrelevance.” Senior policymakers in Paris, Berlin and Brussels are reported to have discussed the possibility of one or more countries leaving the EU while the remaining core pushes on toward deeper economic integration including tax and fiscal policy. “France and Germany have had intense consultations on this issue over the last months, at all levels,” a senior EU official in Brussels told Reuters. George Osborn is to give a speech in less than a month on the health of the European Union economy. He believes the only way for Italy to rise out of their debt crisis is to sell off Italian bonds. Nick Clegg, the deputy prime minister, warned that if Europe does not become more competitive it will end up in a spiral of perpetual decline; that the EU needs to focus on growth not further treaty changes. The Bank of England policymakers announced £75bn-worth of quantitative easing last month in an effort to prevent a recession. City analysts believe the renewed turmoil in the EU is pointing to a deep recession in Europe. Simon Derrick, currency strategist at BNY Mellon, said: “We're at the point of asking the question, if I put my money into Italy, am I going to get it back?” Officials in Brussels insisted on Wednesday there would be no rescue package for Rome, saying, “financial assistance is not on the cards.” BM
