France says troubled euro has 'turned the corner'

29th January 2011, Comments 0 comments

The beleaguered eurozone has put the worst of its debt crisis behind it, France's finance minister told global elites Saturday in Davos, as Germany vowed to defend the stability of the euro.

Christine Lagarde said the success of Tuesday's landmark five-year bond auction worth five billion euros ($6.8 billion) to raise funds for Ireland and help calm financial markets had boosted confidence in the 17-member bloc.

The bond "was oversubscribed nine times. That's an indication that on the market of confidence, the eurozone has turned the corner," Lagarde said, on a panel that also featured German Finance Minister Wolfgang Schaeuble.

"Let's not short Europe and let's not short the eurozone," she said to applause from the business and political leaders attending the annual meeting of the World Economic Forum in this Swiss ski resort.

Schaeuble said the health of the eurozone was not as bad as in some other parts of the world, with his economy, Europe's largest, predicted to expand by between 2.2 and 2.3 percent.

"We are ready and we are able to defend the stability of the euro," said the minister.

Both ministers vowed to improve the workings of the multi-billion-euro rescue fund amid a fierce debate in Europe over whether to allow the facility to buy back the bonds of individual countries.

The comments followed strong commitments to the euro from the leaders of France and Germany that, along with a calmer market situation, has dispelled some of the gloom surrounding the zone.

Earlier in the meeting of some of the world's most influential policymakers, French President Nicolas Sarkozy pledged that Paris and Berlin would "never abandon the euro."

And Chancellor Angela Merkel denied the euro as a currency was in crisis and promised solidarity with some of the eurozone's debt-wracked countries, such as Greece, Ireland and Portugal.

The finance minister of Britain, which is not in the euro area, said he drew optimism from the actions taken by countries on the periphery of the zone to combat their spiralling debts.

"Actually, governments in countries like Spain and Portugal and elsewhere on the European continent are taking difficult decisions to address their own particular problems," said George Osborne.

But not everyone on the panel shared the bullish outlook.

Bob Diamond, the chief executive of British bank Barclays, said: "I don't think anyone is saying the volatility in the markets has completely gone, particularly given the fiscal issues different countries in Europe are facing."

Nevertheless, the banker dismissed as speculation the spectre of a eurozone break-up, considered likely by some analysts at the height of the crisis.

"I think the question of the strength of Europe and is the euro going to stay together was last year's issue and is off the table," he said.

© 2011 AFP

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