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Merkel again demands investors share bailout costs

Merkel again demands investors share bailout costs

German Chancellor Angela Merkel _ citing the wrath of German taxpayers _ insisted Tuesday private creditors must be forced to share the cost of cleaning up any future eurozone debt crises.
She said taxpayers must not get stuck with the bill, as happened in the Greek debt crisis this year.
The German chancellor also said a broad package of economic governance steps, aimed at preventing governments from running up too much debt and endorsed by the EU leaders last week, will have "more bite" to protect the euro.
She said tougher deficit and debt enforcement and a credible crisis mechanism were needed to underpin the euro's stability.
She said banks, hedge funds and other private investors must share in any permanent financial backstop for indebted nations that EU governments are putting together _ a stance that has drawn disagreement from officials such as European Central Bank head Jean-Claude Trichet.
But forcing private bondholders to take a haircut _ in other words, to take part of the consequences of risky lending _ has been a key demand from Berlin, the biggest contributor to both a (EURO)110 billion emergency loan for Greece and a (EURO)440 billion stability fund for the wider eurozone that expires in 2013.
Last week, the EU leaders agreed to craft a permanent financial backstop for future eurozone crises but without spelling out who pays.
Speaking in Bruges, Belgium, Merkel said the Greek government's debt crisis _ triggered by Athens' shoddy statistics and cavalier spending _ made "the European Union stare into the abyss."
She said temporary relief using taxpayer money _ above all from Germany _ led to "to rescue the euro," and austerity in Athens. But she added, "I have been harshly criticized for that."
Berlin is at odds with other EU governments _ and the president of the European Central Bank _ who fear involving bondholders with debt restructuring will hike funding costs for countries like Greece, Portugal or Ireland and again imperil the euro's stability.
On Tuesday, Irish bonds sank for sixth consecutive day and Greek bonds for a seventh day.
But Merkel sounded combative and dug in her heels.
She said in a safety net for government debt crises, "we will ensure taxpayers do not again have to bear the burden alone for possible new mistakes and financial market turmoil. Private investors must also make a contribution."
She also took on critics _ especially in the European parliament _ who questioned her deal with France whereby Paris ended up backing the permanent eurozone safety net and Germany dropped its call for near-automatic fines for incorrigible overspenders.
Merkel said there was no suggestion of a backroom Berlin-Paris deal. She said the EU treaty that took effect this year provides for a permanent president and more structured input from EU leaders themselves.


Updated : 2021-06-16 22:20 GMT+08:00