Chancellor Angela Merkel indicated that Germany is ready to revise the terms of Europe’s rescue fund for indebted states, underscoring her willingness to take whatever steps are necessary to blunt the sovereign debt crisis.
“We support whatever is needed to support the euro, also with respect to the rescue fund,” Merkel told a joint press briefing in Berlin today with Italian Prime Minister Silvio Berlusconi. “We’re saying what we’ve always said since the Greek crisis: We will stand by the euro.”
Merkel may back extra measures to support the single currency after bailouts for Greece and Ireland, budget cuts in Portugal and Spain and a deal to create a permanent crisis- resolution mechanism all failed to calm bond markets. She is due to discuss support for the euro in talks with International Monetary Fund Managing Director Dominique Strauss-Kahn today.
“They are learning and they are changing their position,” Carsten Brzeski, an economist at ING Groep NV in Brussels, said in an interview. “We’ve all learned that if one country takes the bailout package, it does not mean that the contagion and speculation stops.”
Merkel was responding to remarks made by European Union Economic and Monetary Affairs Commissioner Olli Rehn, in which he called for a “comprehensive” plan to contain the sovereign debt crisis. His proposals included an expansion of the “size and scope” of the EU’s 440 billion-euro ($574 billion) rescue fund, the European Financial Stability Facility.
Merkel said as recently as Dec. 6 that she saw “no need” to restock the fund. She declined to comment on the specifics of Rehn’s proposals today.
Any attempt to increase aid for over-indebted euro-area countries from Germany, already the biggest contributor to the fund, risks running into opposition from Merkel’s coalition parties as they prepare to fight elections this year in seven of Germany’s 16 states.
“I would certainly expect significant resistance in the Bundestag if an expansion of the rescue umbrella were to be suggested,” Norbert Barthle, budget spokesman for Merkel’s Christian Democratic Union and its CSU Bavarian sister party, said in an interview in Berlin.
Portugal staged a successful bond auction today, helping bolster the euro, which has lost about 10 percent against the U.S. dollar over the past year. The euro gained 0.5 percent to $1.3043 at 10:28 a.m. in New York, from $1.2974 yesterday.
At her press briefing, Merkel said that the fund’s “volume is far from being used up,” with Ireland the sole country to tap it after Greece received a separate aid package.
“Beyond that I’ll say that Germany will do whatever is necessary so that the euro remains stable,” she said. “That’s our joint currency, from which Germany has profited a great deal.”
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