Merkel assures investors no euro risk before 2013

By Andreas Rinke

BERLIN (BestGrowthStock) – German Chancellor Angela Merkel attempted to clarify to nervous financial markets on Thursday that her vision of private investors sharing the risk of future euro zone crises would only affect them from 2013 onwards.

While some senior European officials criticize Merkel for unnerving markets with her comments on the currency and future crisis plans, the center-right German leader told a conference in Berlin Europe was showing “more solidarity than a year ago.”

In a nod to investors who have sold Irish government bonds and other peripheral euro zone debt partly on her comments that banks and investors should share in the risk, Merkel said market forces would benefit a future permanent crisis mechanism.

“This is not about the crisis mechanism from now until 2013 having something in it changed. That will remain as agreed. This is about a future crisis mechanism. Neither is it about bonds that come under the old, temporary crisis mechanism,” she said.

“We are of the opinion that market mechanisms, in other words different interest rates, will impose discipline,” the chancellor said.

As France and Germany seek a common position on a bailout mechanism, French Economy Minister Christine Lagarde emphasized that such a plan should treat private sector creditors on a case-by-case basis rather than lay down rules ahead of time.

“The private sector should be involved in the consequences of an aid program only on a case by case basis,” she told a parliamentary committee.

“Every situation will be different, the group of private creditors will be different, so we should not put into place a system that will be mechanically designed.”

Merkel, who spooked markets this week with comments that the euro’s situation was “exceptionally serious,” said she was more confident now than a year ago in Europe’s stability.

With contagion from Ireland threatening to engulf Portugal, Merkel said she saw “no euro zone country today in the position of needing a restructuring” of its debt.

European policymakers including some at the European Central Bank are irritated at Merkel for not differentiating between the troubles of individual countries and the single currency itself.

Eurogroup chairman Jean-Claude Juncker told one newspaper Germany was “slowly losing sight of the European common good.”

But Merkel got clear support from Guido Westerwelle, a key coalition ally and foreign minister, who said the new crisis mechanism needed “shared liability” from private investors.

“We want a euro that is protected from turbulence by a weather-proof policy,” he said after meeting new French Foreign Minister Michele Alliot-Marie. Westerwelle said the German and French positions on this were “very close to each other.”

(Additional reporting by Thorsten Severin in Berlin and Nick Vinocur in Paris; writing by Stephen Brown; editing by Philippa Fletcher/Ruth Pitchford)

Merkel assures investors no euro risk before 2013