In a rare concession, the German Chancellor admitted that austerity alone would not solve the crisis but she insisted that the wave of political opposition to fiscal discipline was wrong.
“We’re not saying that saving solves all problems,” Ms Merkel said at a conference in Berlin. “[But] you can’t spend more than you take in. You can’t live your whole life this way. Everybody knows this.”
European markets regained some of their losses from Monday’s rout after the Netherlands and Spain held successful bond auctions. Spain’s Ibex rose 2.24pc, Italy’s MIB was up 2.48pc, the French CAC jumped 2.29pc and the DAX climbed 1.03pc. In London the FTSE 100 rose 0.78pc.
Mark Rutte, the deposed Dutch prime minister, made a passionate plea to politicians to stick to his proposed budget cuts. “The problems are serious, the economy is stalling, employment is under pressure and government debt is growing faster than the Netherlands can afford,” he said. “Those are the facts and nobody can run away from them. I’m standing here without pretences, it is up to parliament and the voters.”