Ecb, Europe Debt Crisis | featured news

As Cypriot politicians raced to find a new financial rescue plan ahead of a Monday deadline, tensions built in the streets of the capital. Residents withdrew what money they could from ATMs amid concern the banks could collapse.

The European Central Bank is prepared to cut off funding to Cyprus and let the Mediterranean island succumb to financial meltdown if it has to, confident it has unlimited firepower to protect the rest of the euro zone.

Angela Merkel tried to calm a growing storm over euro zone crisis strategy on Sunday after the Bundesbank likened ECB bond-buying plans to a dangerous drug and a conservative ally of the German leader said Greece should leave the currency bloc by next year.

Germany and France clashed on Wednesday over whether the ECB should take bolder steps to stem the euro zone debt crisis, with Chancellor Angela Merkel issuing one of her starkest warnings yet against fiddling with the central bank's strict inflation-fighting mandate.

Cutting Greece's debt will not solve the country's problems, ECB policymaker Jens Weidmann was quoted as saying on Sunday, adding Athens needed to raise its productivity instead.

The European Central Bank said on Thursday it opposed forcing private creditors to take part in debt relief for Greece, pushing back against Germany, which has demanded a bond swap to lengthen Greek debt maturities.

European Central Bank policymakers underscored the case for an April rate hike on Thursday as Portugal's political crisis raised the prospect of another spell of reluctant ECB bond market intervention.