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Merkel says EU aid fund will protect the euro

AFP/The Local · 10 May 2010, 16:25

Published: 10 May 2010 09:33 GMT+02:00
Updated: 10 May 2010 16:25 GMT+02:00

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"This package serves to strengthen and protect the common currency," she told reporters, hours after the European Union announced an unprecedented intervention worth more than €750 billion backed by the International Monetary Fund and central banks worldwide.

"We are protecting our currency in an extraordinary situation," Merkel said, adding that that nevertheless the eurozone must do more to tackle its stability problem by pressing member states to balance their budgets.

"We must attack the problem at its roots," Merkel said. "In this process, budget consolidation in all member states becomes extraordinarily important."

Merkel welcomed new austerity measures pledged by Spain amid fears that the perilous Greek debt crisis could spread throughout the 16-nation eurozone, saying they sent "an important message to the markets."

After days of plummeting in value on world markets, the euro surged in Asian trade on the news of the latest rescue package, which leaders hope will represent a game-changing financial war chest in the face of damaging economic instability.

On Monday, Europe's single currency traded for $1.29 after bouncing back from €1.2523 - its lowest level since March 2009.

Merkel added that Germany as the eurozone's biggest economy would also introduce budget cuts to get its own fiscal house in order.

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Berlin's participation in the EU rescue package requires parliamentary approval however, and Merkel said she planned to meet party leaders later on Monday and that her cabinet would examine the necessary legislation on Tuesday.

But she added that approval of the legislation would take "a bit longer" than the passage of a law rushed through last week that gave the green light to Germany's €22.4-billion ($29.2-billion) contribution to a €110-billion package of loans to Greece.

AFP/The Local (news@thelocal.de)

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Your comments about this article

10:03 May 10, 2010 by Bushdiver
Doesn't sound too promising to me. This will just help countries who are already in debt get deeper in debt. I
10:25 May 10, 2010 by zzzxtreme
history tells us, it's not as easy as it seems
12:46 May 10, 2010 by debschen72
I don't believe this is "an extraordinary situation". How does Frau Merkel know that?
14:09 May 10, 2010 by Bushdiver
If the markets are bouncing back just because of the so called rescue plan then they must all be idiots. No details what so ever. Is it even real, do they even have a stratagy and why haven't they stated what the plans are? Sounds like a bunch of bull if you ask me.
15:42 May 10, 2010 by pmach
Just print money like the USA and all the problems will just go away. Opening bell and yes we got a winner Germany has done it and the markets rebound 400 points on the opening...... crises averted. The crowed goes wild...yaaaaaaaaaaa!
16:51 May 10, 2010 by tallady

As of October 2009[update], with more than €790 billion in circulation, the euro is the currency with the highest combined value of banknotes and coins in circulation in the world, having surpassed the U.S. ,,a bounce from the introduction of the new save the euro fund has yet to be tested ,lets see if Germany will be able to take the pressure when things heat up ,and they surely will.
17:33 May 10, 2010 by pmach
Or it could weaken the Euro to parity with the US dollar. Euro exports would explode.
00:04 May 12, 2010 by Beachrider
This 'print more bills' stuff is just metaphorical, you know. The USA Fed never printed any bills, those come from the Treasury. What the Federal Reserve really did was to increase 'M1' by decreasing the reserve-margin and other bank-currency-multipliers. Given the often-cashless transactions in the USA, we just don't need as much 'M0' (circulation currency).

The Euro, on the other hand, is used in countries with a much higher number of transactions done-in-cash. It is not surprising that you need so much 'M0'.
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