EU needs 'courage' to set limits on markets: Merkel

24th November 2010, Comments 0 comments

German Chancellor Angela Merkel said Wednesday that the European Union should have the courage to set limits on markets and ensure that private investors bear some of the risk on government bonds.

"Do politicians have the courage to also make those who earn a profit take some of the risk?" Merkel said in a speech to parliament. "This is about the primacy of governments, about setting limits on markets."

Germany wants a new rescue mechanism for eurozone countries in need from 2013 to ensure that private investors, not just taxpayers, pay their share if a government defaults on its bonds.

The proposal, however, has rattled markets and some other European governments anxious about their own needs to raise cash via bond sales, making for tough negotiations ahead of a summit of the bloc's leaders in mid-December.

With its banking system in dire straits and its budget deficit forecast to be 10 times the EU limit this year, Ireland on Sunday became the second eurozone member in six months to apply for a bailout after Greece.

"We have said that the stability of the euro as a whole must be guaranteed and therefore we will ... consider the appeal of Ireland positively," Merkel said on Wednesday.

However, she said this was conditional on "making clear what steps a country must take to get back on a path of stabilisation."

The bailout is reportedly worth some 85 billion euros (114 billion dollars).

© 2010 AFP

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