Bloomberg News

Merkel Says Europe Has Debt Problem, Not a Currency Problem

June 01, 2011

(Adds Merkel’s comment on euro in last paragraph.)

June 2 (Bloomberg) -- German Chancellor Angela Merkel said the European Union remains committed to its shared currency as the region struggles with a debt crisis that could send Greece into default.

“We don’t have a euro problem in Europe,” Merkel said in a speech in Singapore today on the final day of a three-day Asia trip that also took her to India. “We have more of a debt problem. Financial markets doubt whether some EU states can manage their debt in the long-term.”

Germany is committed to the euro, which is stable, she said. The outlook for growth in the country’s economy, Europe’s largest, is “very positive.”

Her comments came as policy makers discuss a second aid package in two years to help Greece avoid a possible default and prevent more financial turmoil in the region. The country’s additional needs may be known as early as today as European and International Monetary Fund officials finish an assessment of the country’s public accounts that Merkel has said will shape her response to the latest stage of the debt crisis.

“The economic and monetary union has to be a community of joint responsibility,” Merkel said. “It is our joint interest to tackle the structural weaknesses of individual countries forcefully and effectively.”

Greek Bonds

Greek bonds have soared to records even after last year’s 110 billion-euro ($158 billion) rescue package as the government, saddled with Europe’s heaviest debt load, has failed to meet planned budget deficit targets and the economy shrinks for a third year.

Moody’s Investors Service yesterday downgraded Greece’s sovereign debt to Caa1 from B1, putting it on a par with Cuba, and increasing the risk of default by 50 percent.

Merkel’s government this week decided to abandon the country’s use of nuclear power, shutting 17 atomic plants by 2022. That decision was influenced by the disaster at Japan’s Fukushima Dai-Ichi nuclear power plant that was crippled in March by a record earthquake and tsunami, Merkel said today.

The euro has risen more than 17 percent against the dollar in the past 12 months, a situation that has hurt European exporters, Merkel said.

“The euro is strong against the U.S. dollar,” she said. “We think sometimes even very strong, which doesn’t help our exports.”

--Editors: John Brinsley, Paul Tighe

To contact the reporters on this story: Jan Dahinten in Singapore at jdahinten@bloomberg.net; Shamim Adam in Singapore at sadam2@bloomberg.net

To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net; Peter Hirschberg in Hong Kong at phirschberg@bloomberg.net


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