Merkel seeks to soothe markets on eurozone

25th November 2010, Comments 0 comments

German Chancellor Angela Merkel sought Thursday to ease tensions on eurozone markets, insisting that stability in the 16-nation bloc had improved and that no member was in danger of having to restructure its debt.

She made clear that a proposal for investors to shoulder part of the costs of national bailouts would apply only after an existing rescue scheme expired in 2013, addressing critical uncertainty behind recent market turmoil.

"There is a high degree of nervousness in the markets, and therefore I would like to make very clear here what I have often said," Merkel said in a speech in Berlin.

"We are not talking about changing the current crisis mechanism that expires in 2013. Everything will stay as agreed. What we are talking about is a crisis mechanism for the future."

"It is about what to do in the case of a country needing the crisis mechanism at some time for bonds sold after 2013 ... I see today absolutely no case of a eurozone country in such a situation."

With Ireland on Sunday becoming the second eurozone country in six months to seek help from the European Union and the International Monetary Fund after Greece, recent comments from Germany had deeply unsettled markets.

Finance Minister Wolfgang Schaeuble said this week that the future of the euro was "at stake."

But Merkel maintained on Thursday that eurozone countries had made good progress in bringing their deficits under control since the Greek crisis.

"I am more confident than in the spring that the eurozone will make it out of the current turbulence," she said.

"Other countries have now made huge efforts recently, meaning that for the euro, I would say that from today's point of view we look considerably better when it comes to our stability culture than we did a year ago, or before the crisis."

Merkel also said she saw no danger at present of any eurozone member being forced to restructure its debt.

"I see today absolutely no case of a eurozone country in such a situation."

Speaking at the same conference, the head of the German central bank, Axel Weber, dismissed the possibility that the euro was in danger.

"Instead what we have is some countries who went off course with their finances," Weber said.

Meanwhile, Merkel and French President Nicolas Sarkozy were expected to speak later Thursday by telephone to discuss "the current problems in the eurozone," according to her spokesman.

Earlier, French Foreign Minister Michele Alliot-Marie and her German counterpart Guido Westerwelle said after talks in Berlin that the two countries were working on a new crisis mechanism that would defend the euro against speculators.

"We are confronted today by an attack by speculators on Europe and on the euro, with countries that could appear fragile the first in speculators' sights," Alliot-Marie told reporters.

"At the moment we are in discussions. The mechanism has not yet been fixed but this is one of the elements that is on the table and which we are working on."

She said the aim was to have a system in place "allowing us to respond comprehensively and durably in order to ensure that the euro has a solid future," she added.

© 2010 AFP

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