Tags: Merkel | Investors | Fear | Unthinkable | Problems | Prodi

Merkel Made Investors Fear ‘Unthinkable Problems,’ Prodi Says

Monday, 29 Nov 2010 08:43 AM

German Chancellor Angela Merkel’s warnings about the health of the euro region led investors to dream up “unthinkable problems,” fueling market turmoil, former European Commission President Romano Prodi said.

“They don’t help,” Prodi said of Merkel’s comments in an interview with Bloomberg Television in Sarteano, Italy. “It may be absolutely wise to say that the banks must share the burden of, let’s say, unethical behavior, but this is not the moment, I think. And when you do that, you must put all the technical conditions on the table, because otherwise people will think of unthinkable problems.”

The euro on Nov. 23 dropped to below $1.34 for the first time since September after Merkel said the 16-nation currency region is in “exceptionally serious” straits after Ireland asked for a financial bailout. Borrowing costs have risen for Europe’s so-called peripheral countries as contagion spreads from the region’s debt crisis, with the premium on Spain’s bonds over German bunds rising to a euro-era record yesterday.

Merkel is pushing a proposal to make bondholders share the cost of any financial rescues after 2013, when a European-led 750 billion-euro ($1 trillion) bailout fund expires. Still, her remarks give the impression “the Germans have been the victims or the martyrs of the euro, and this is not true,” Prodi, a two-time former prime minister of Italy, said in the interview late yesterday. “Before the euro, there was no surplus in Germany and now Germany has a fantastic, enormous surplus.”

‘Solidarity’

Germany is ready to “act in solidarity” to help preserve the single European currency, Merkel said yesterday in a speech to business executives in Berlin. Germany wants “a strong euro,” she said, pressing her plan for a permanent safety net from 2013 if any euro country gets into debt trouble.

Ireland is set to become the first country to tap the bailout fund, whose central pillar is the European Financial Stability Facility. Its size may have to be increased if it’s necessary to restore confidence in the euro, Deutsche Bundesbank President Axel Weber said on Nov. 24 in Paris. Germany’s Finance Ministry said yesterday it’s not considering expanding the EFSF and Weber said later that the fund has sufficient capital.

Weber, speaking at a panel discussion yesterday in Berlin, declined to comment on speculation he’s a candidate to become president of the European Central Bank. Mario Draghi, governor of the Bank of Italy, is also seen as a possible candidate.

Draghi “deserves” the job, Prodi said, calling the Rome native “brilliant, honest.” While the decision on a successor to ECB President Jean-Claude Trichet may require a political agreement, “I simply tell you, Draghi is first class.”

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German Chancellor Angela Merkel s warnings about the health of the euro region led investors to dream up unthinkable problems, fueling market turmoil, former European Commission President Romano Prodi said. They don t help, Prodi said of Merkel s comments in an interview...
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2010-43-29
Monday, 29 Nov 2010 08:43 AM
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