German Chancellor Angela Merkel called for tougher regulation aimed a stock and bond traders along with a crackdown on government debt to contain the continent's financial crisis, warning the future of the euro itself was at stake.
As she urged lawmakers to pass Germany's share of a new 750 billion euro (£651 billion) eurozone rescue package, Mrs Merkel said that defending the shared European currency is "about no more and no less than the preservation of the European idea".
"That is our historic task; if the euro fails, then Europe fails," she told the lower house of parliament today. "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."
Mrs Merkel's warning follows Germany's decision on Tuesday to ban so-called naked short-selling of eurozone government debt and shares of major financial companies in an attempt to ward off steep market drops.
Naked short-selling involves traders selling shares or investments they don't hold in hopes of buying them cheaper later; it's a way of betting a financial asset will fall in price and profiting from the fall.
Germany's roiled financial markets, in part because it suggested to traders that policymakers were grasping at straws to stem the crisis of confidence over the ability of European governments to pay off their heavy debt loads amid slow growth.
Fears that some governments may eventually fail to pay all they owe, or will have to cut back so severely that they sink their economies into prolonged recessions, have weighed on stocks and led to discussions that the 11-year-old eurozone will someday break up. The one trillion dollar backstop is an attempt to calm those fears by removing the possibility of imminent default, though it does little to address the underlying debt issue.
Politicians have also roundly condemned "speculators" for selling off government bonds, which drives up their borrowing costs and makes it even harder to keep their finances under control. But many analysts say the real problem is simply too much debt.
Still, Europe is showing a new-found resolve to strengthen its regulatory grip. On Tuesday, European Union governments agreed to tighten rules for hedge funds, lightly regulated investment funds that cater to rich and institutional investors and promise high returns from often complex trading strategies.
Citing the short-selling restriction, Merkel said Germany will act alone in areas where that causes "no damage," and said the ban would remain until wider European rules are drawn up.
Germany, Europe's biggest economy, is to contribute at least 123 billion euro in loan guarantees to the new rescue package. Parliament is expected to vote on Friday - just two weeks after approving a separate package for Greece, already unpopular at home.
In Paris, French Finance Minister Christine Lagarde said her country would provide loan guarantees of up to 111 billion euro, with legislation going to parliament on May 31.
Mrs Merkel stressed that aid decisions will need unanimous approval from all involved and that, where credit is from other governments instead of a common European pot of money, "we decide ourselves on every use of the funds".
The head of Germany's central bank, the Bundesbank, called for speedy approval this week of the package to calm markets. Axel Weber told parliament's budget committee that access to rescue funds should only be possible if the financial stability of the whole eurozone is at stake.
While the root cause of the debt crisis was insufficiently competitive countries living above their means, Mrs Merkel said, markets poured oil on the fire.
"We are now seeing anew how, through a lack of limits and rules, purely profit-oriented behaviour on the financial markets can be destructive," Mrs Merkel added. "It is the task of politicians, parliaments and governments to intervene, to regulate, in case of doubt to ban in order to keep the risks controllable."
Mrs Merkel renewed a pledge to push for taxation of financial markets - either a financial transaction tax or another form of levy - in Europe and beyond. She also pushed for quick action to put ratings agencies under European supervision and increase transparency on derivatives markets.
The chancellor acknowledged that Berlin faced accusations of being "hesitant or slow" in agreeing rescue packages for debt-laden European nations, but was unapologetic about pushing for them to be made to tackle their budget deficits.
"Europe needs a new culture of stability," she said, with faster and more effective punishment for countries that habitually run excessive deficits.
Those could include withholding European Union structural funds and temporarily withdrawing voting rights from repeat offenders, she said - adding that it was important to draw up procedures for an "orderly state insolvency."
Above all, though, Mrs Merkel said all EU members must speed up cutting their deficits.
"Only then can the rescue attempts be effective, because continuing to cover up the real causes of the crisis wouldn't help Europe," she said. "Germany advocates lasting stability in Europe - we're not going to spare anyone in Europe from that."