German chancellor Angela Merkel has said the proposed referendum in Greece last week showed that domestic policies in one country now impact on the entire euro zone.
"What we got in Cannes [where the European Summit was held] was the feeling that there is no such thing any more as domestic policy making," Dr Merkel was cited as saying in an interview today.
"Domestic is what's inside the currency area. Greece can no longer decide all by itself the issue of whether it should hold a referendum or not."
The decision in Greece, which was subsequently overturned, "had ramifications for all of us because the dependability of decisions taken by the 17 was suddenly endangered," Dr Merkel said.
"All the other 16 were just as affected by this referendum decision.”
At an event in Berlin this morning, Dr Merkel said Europe must act "swiftly" to tackle the sovereign debt crisis to ensure the bloc remains internationally relevant. "We need to move swiftly because the world is not waiting for Europe," she said.
Separately, a panel of economic advisers to the German government have cut their forecast for the country’s economic growth next year.
Steps to increase the strength of the European Financial Stability Facility, laid out the October 26th European summit, would only temporarily ease the crisis, the advisers said in a report published in Berlin today.
They forecast growth in Germany next year of 0.9 per cent after 3 per cent this year. The government had forecast 1 per cent growth next year.
"The current package is no sustainable solution for the problems of the euro area," the panel said in its annual report.
"But it opens a window of time for policy makers that they must use decisively to create a political framework for the euro area marked not only by solid state finances but also a stable financial system."
European officials are working to flesh out the details of plans to scale up the rescue fund's power as political turmoil in Greece and Italy drives borrowing costs to euro records.
There's still no certainty that those measures taken by leaders in Brussels last month will return confidence to markets in the short term, "and certainly not permanently," the panel said.
Dr Merkel said her government "shares the view [in the report] that the global economy faces multiple uncertainties."
Bloomberg/Agencies