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German Banks Say EU750 Billion Rescue Fund Sufficient

Jan. 10 (Bloomberg) -- The 750 billion-euro ($968 billion) rescue fund aimed at stemming the euro region’s debt crisis is “sufficient” for now and shouldn’t be increased, the Association of German Banks said.

“I don’t think an increase is necessary,” Michael Kemmer, general manager of the lobbying group that represents more than 220 banks in Germany, said at an event in Berlin today. Raising the amount may unsettle financial markets by signaling that the crisis is worsening even though only a small part of the money has been tapped, Kemmer said.

Germany may soften its opposition to expanding the rescue fund after Chancellor Angela Merkel’s chief spokesman, Steffen Seibert, declined to repeat the objections. With governments including Portugal and Spain due to borrow at least $43 billion this week, attention is shifting to whether Europe is doing enough to stem the crisis.

The use of joint euro-region government bonds shouldn’t be ruled out entirely as a temporary measure if the debt crisis worsens, according to Kemmer, who also said the banking association is “in principle” opposed to them.

“We can’t rule out extreme situations where euro bonds would be the lesser of two evils,” Kemmer said. Such debt would have to be part of temporary measures and the individual country in need of financing would be required to share the burden as well as forfeit some sovereignty, he said.

European Central Bank Governing Council member Axel Weber said last month that euro bonds wouldn’t improve confidence in the euro-region member states’ finances. German and French policy makers have dismissed calls to issue joint euro-region government bonds.

To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net; Edward Evans at eevans3@bloomberg.net

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