PARIS – European leaders rushed on Monday to stop a rampaging debt crisis that threatened to shatter their 12-year-old experiment in a common currency and devastate the world economy as a result. One proposal gaining prominence would have countries cede some control over their budgets to a
central European authority. In a measure of how rapidly the peril has grown, that idea would have been unthinkable even three months ago.
World stock markets, glimpsing hope that Europe might finally be shocked into stronger action, staged a big rally. The Dow Jones industrial average in New York rose almost 300 points. In France, stocks rose 5%, the most in a month.
More relevant to the crisis, borrowing costs for European nations stabilized. They had risen alarmingly in recent weeks – in Greece, then in Italy and Spain, then across the continent, including in Germany, the strongest economy in Europe.
The yields on benchmark bonds issued by Italy and Germany rose, but only by hundredths of a percentage point. The yield fell 0.1 percentage point on bonds of France, 0.14 points for those of Spain and 0.22 points for Belgium.
Allowing a central European authority to have some control over the budgets of sovereign nations would create a fiscal union in Europe in addition to the monetary union of the 17 countries that share the euro currency.