Merkel Will Avoid `Masochistic' Move of Allowing Euro to Fail, Prodi Says

Former European Commission President Romano Prodi said Germany will ultimately ensure the survival of the euro, amid concern within Chancellor Angela Merkel’s coalition about the cost of rescue measures.

“At the end of the story there will be some basic agreement,” Prodi, also a former prime minister of Italy, said in an interview in Beijing today. “They go to the brink and they take a decision,” he said, referring to Germany.

Germany, with an unemployment rate at its lowest in 18 years, has been reluctant to bail out underperforming neighbors. At the same time, Merkel has indicated she may be easing her opposition to expanded measures as European finance chiefs start work on a revamped strategy for fighting the region’s debt woes.

The single currency weakened against 15 of 16 major counterparts today, declining to $1.3292 as of 8:21 a.m. in London.

The euro enables Germany to accumulate trade surpluses because other EU nations can’t devalue their currencies as they did before the euro’s creation, according to Prodi.

Germany reported a 12.9 billion euro ($17 billion) surplus in November, the most recent month for which figures are available. China’s excess of exports over imports in December was $13.1 billion.

Hindering efforts to resolve the crisis would be “masochistic” or like committing “suicide,” said Prodi, chair professor of Sino-European dialog at the China Europe International Business School in Shanghai. Corporate Germany will “never permit” scrapping the euro, he added.

Greek Rescue

During the crisis, Merkel has held out against some rescue measures, stalling on an aid package for Greece to win stiffer budget-cutting conditions.

With elections this year in seven of Germany’s 16 states, she risks further alienating voters if she agrees to revamped rescue funds to fulfill her pledge to do “whatever is needed” to save the euro. Some coalition lawmakers have expressed concern at any attempt to bolster the EU’s bailout tools at the expense of German taxpayers.

Germany, as Europe’s biggest economy, is already the largest contributor to the EU’s 440 billion-euro bailout fund.

To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing on khamlin@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at Ppanckhurst@bloomberg.net

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