German fin min backs euro for future

2nd December 2010, Comments 0 comments

German Finance Minister Wolfgang Schaeuble dismissed the idea of the eurozone breaking up, saying he is convinced the euro will remain a stable world currency in the future.

Schaeuble told the French daily, Les Echos, in an interview to appear Friday that he is "completely certain that we have all the means (necessary) to maintain the euro as a stable world currency in the future."

The minister said the euro "is not only a great advantage for Europe. The world economy too, more and more independent, needs a strong European currency."

Massive debt and deficits in Ireland led to Dublin asking for an 85-billion-euro (113 billion-dollar) bailout last week, after Greece needed help in May, sparking fears their problems could hit others and bring down the whole euro project.

Schaeuble, referring to a European debt rescue mechanism, said it was also in the interests of private investors to help out a struggling country rather than wait for it to collapse and lose everything.

Germany has argued that private creditors of a failing country should share the burden of any bailout, rather than leaving it to taxpayers alone, but the issue is highly controversial.

Schaeuble said "it is not as though we are asking for something that harms (private creditors). We are not asking them for charity, we are just showing them where their best interest lies -- if they don't help out, there is a bigger risk that the state will become insolvent and in that case they should of course take part in the rescue."

Private sector buyers of sovereign bonds argue, however, that they have bought an investment which is supposed to be 100 percent secure, with repayment in full guaranteed.

If those are not the terms involved, they say, then the price has to reflect the higher risks involved -- and bonds of weaker eurozone countries have accordingly suffered in recent months.

This outcome has in turn only added to the cost of those states trying to raise fresh funds, eventually hitting unsustainable levels and forcing them into drastic measure -- or as in Greece, into the arms of the EU and International Monetary Fund.

© 2010 AFP

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