German Chancellor Angela Merkel warned lawmakers Wednesday that failing to shore up government debt and enact tougher financial regulations puts the euro "in danger" and threatens the very future of Europe.
Merkel pressed the German parliament to approve Germany's portion of a C750 billion eurozone rescue package, saying protecting the euro is key to preserving European unity.
"That is our historic task; if the euro fails, then Europe fails," Merkel told parliament's lower house. "The euro is in danger -- if we do not avert this danger, then the consequences for Europe are incalculable, and then the consequences beyond Europe are incalculable."
Merkel's comments came a day after Germany unilaterally moved to ban naked short-selling of shares of its top financial companies, eurozone government debts and credit default swaps. The move sent markets tumbling Wednesday on fears that Europe is still grappling with how to fix its spiralling debt crisis.
"The last time anyone checked, Germany was part of a larger European monetary union, and they tend to act together, and they didn't in this case," BNN's Kim Parlee told Â鶹´«Ã½ Channel Wednesday evening.
"And what that actually causes is people thinking, ‘Are countries just going to go off on a one-off basis and change rules here? If that happens, what does it mean to trading over here?' Because money doesn't just trade in one country, it trades all over the world and flows all over the world. So that was something that upset the markets and investors."
Germany's move sent the euro plunging to a four-year low Wednesday before it rebounded to $1.23 US. Experts predict the euro's slide will continue if countries such as Greece and Portugal fail to get their debts under control.
"This could be the first step in the demise of the euro," Patricia Croft, chief economist at the Royal Bank of Canada, told Â鶹´«Ã½. "Indeed, the downward pressure we're seeing, the significant selling pressure, is investors saying this currency is not going to survive the next 10 years."
Europe's debt crisis has instilled fear in investors that some countries will be unable to repay what they owe and descend into long-term recessions, all of which could lead to the break-up of the 16-country eurozone.
Former prime minister Paul Martin said Europe's debt crisis does threaten the future of the eurozone, as banks in healthier countries take on debt from their counterparts in struggling nations.
"In many of these countries, such as Greece or Portugal, they're financing outside of their borders," Martin said Wednesday on CTV's Power Play. "And the people who are picking up those loans are French banks and German banks and Spanish banks. So all of a sudden, they're the ones that are going to suffer again."
"Let me tell you, there are economic cycles and there are economic downturns," Martin added later, "but there is nothing as serious as an economic downturn that is brought on by a bank crisis."
European governments have tried to stop the bleeding by approving a multi-billion dollar bailout for Greece, and agreeing to tighter regulations for hedge funds.
The C750 billion eurozone package is an attempt to further calm fears by offering a safety net to struggling economies.
As part of the package, Germany has committed to offer at least C123 billion in loan guarantees. Parliament is scheduled to vote on that measure Friday.
In France, Finance Minister Christine Lagarde said France was prepared to offer loan guarantees of up to C111 billion. Lawmakers there are expected to vote on the measure on May 31.
Merkel also pushed Wednesday for a global tax on financial institutions, a proposal Canada opposes, and called for countries struggling with high debt to be forced to balance their books.
"Europe needs a new culture of stability," Merkel said.
With files from The Associated Press
