Merkel backs ECB aid terms

BERLIN — Chancellor Angela Merkel backed the European Central Bank’s insistence on conditions for helping reduce borrowing costs in indebted countries, saying Germany is “in line” with the ECB’s approach to defending the euro.

By (Bloomberg)

Published: Sat 18 Aug 2012, 10:32 PM

Last updated: Tue 7 Apr 2015, 12:16 PM

“Obviously time is pressing” on stamping out the debt crisis, though “on many of these issues we feel we’re on the right track,” Merkel told reporters in Ottawa on Thursday at a joint Press conference with Canadian Prime Minister Stephen Harper. Euro-area policymakers “feel committed to do everything we can to maintain the common currency.”

Asked about ECB chief Mario Draghi’s announcement that the central bank may return to sovereign bond-buying, Merkel said recent ECB decisions “have made it clear that the European Central Bank is counting on political action in the form of conditionality as the precondition for a positive development of the euro.”

Merkel, facing European pressure to ease bailout terms and allow shared debt as well as calls by global partners to stop contagion, returned to the crisis fight after her summer vacation, using the trip to Canada to make her first public comments on the turmoil in a month. She hailed Canada’s budget and debt discipline as a model for the 17-nation euro area.

Draghi said on August 2 that the ECB might buy government bonds to help lower borrowing costs in countries such as Spain and Italy, though only in return for strict conditions and if governments act first by buying debt through Europe’s bailout funds. Spain and Italy have yet to say whether they will request aid.

Merkel is returning to the global stage as the crisis enters a new phase. Germany’s supreme court will rule on the legality of Europe’s permanent rescue fund next month, when Greece’s international creditors are due to report on progress in meeting bailout targets. Draghi said the ECB will thrash out the details of its bond-buying proposals by then.

Merkel steps up her crisis-fighting diplomacy next week, when she is due to host French President Francois Hollande on August 23, Paris-based Agence France-Presse reported, one day before Greek Prime Minister Antonis Samaras visits Berlin for talks. Italian media reported that Prime Minister Mario Monti is due in the German capital on August 29, while Spanish Prime Minister Mariano Rajoy has said that Merkel will visit Madrid on September 6.

Finnish Foreign Minister Erkki Tuomioja said his country, one of four in the euro region with the top AAA credit rating, is preparing for the currency union’s breakup, the UK’s Telegraph newspaper reported on Friday, citing an interview.

“We have to face openly the possibility of a euro breakup,” Tuomioja was quoted as saying. While that’s not advocated by the Finnish government, a breakup “could make the EU function better.” Tuomioja told Finnish media on Friday that he had only been stating the obvious.

Merkel, as leader of Europe’s largest economy and the biggest single contributor to euro-region bailouts, is facing calls from Italy and Spain to pool debt to bring down bond yields, from Greece to back an easing of its austerity timetable and from the ECB for politicians to take the lead in fighting the crisis. She also faces domestic pressure from her coalition partners to refuse any more aid for Greece.

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