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Merkel tells Club Med not to expect cash transfers

AFP · 18 May 2010, 17:21

Published: 18 May 2010 17:21 GMT+02:00

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In an interview with major newspapers in France, Spain and Italy, Merkel said: "Joining the eurozone isn't about creating a union made up of financial transfers."

Merkel's warning came as she faced strong domestic opposition to Germany's participation in the IMF-led bail-out of debt-ridden Greece and the creation of the eurozone's trillion-euro emergency stabilisation fund.

European leaders have tried to sell both measures to voters as essential tools to protect national economies from speculative attacks and reassure banks that eurozone states will not default on their debts.

But there is resentment in relatively wealthy states such as Germany that strugglers such as Greece and eventually Portugal or Spain might get bailouts after years of overspending on generous welfare and pension systems.

Merkel told the French daily Le Monde, Spain's El Pais and Italy's Corriere della Sera that Germany believes "solidarity and solidity are inseparable" in the eurozone single-currency bloc. "For Germany, this culture of stability and solidity is not negotiable."

Germany has been pushing for its fellow eurozone members to adopt rigorous public spending to cut deficits, halt the slide of the euro and stabilise financial markets spooked by the fear of sovereign debt defaults.

Press reports say Germany could demand a European version of its own constitutional "debt brake," which puts a legal limit on public deficits.

Story continues below…

The eurozone was founded on treaty-based commitments to run national economies as a matter of common interest, by means of national controls on public finances and policies to achieve convergence.

The term "transfer union" is used broadly to mean a politically different cooperative pooling of resources so that funds flow via a common fund, or under an automatic system, from stronger countries to weaker countries, much as occurs within countries between strong and weak regions.

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Your comments about this article

16:53 May 18, 2010 by AASalem
Cool Date :]
16:56 May 18, 2010 by William Thirteen
what is that sitting in front of Angie? is she using an Android device?
20:10 May 18, 2010 by Eagle1
Nothing will change until Europe takes a fiscal turn to the hard right. These lazy socialists should be cut loose and set adrift. Stop feeding the cancer. It's time for some tough love.
23:06 May 18, 2010 by munchau
we must stand behind are European brothers and offer money to fight off the speculators from london and new york who are selling our beloved euro
23:18 May 18, 2010 by cheerios
I agree with Eagle1. Its horrible that until now, Germany has just been giving and giving money to poorer countries in the EU. Working and living in Germany AND seeing the Euro slide to an-alltime low (just when I'm going to go on holiday), makes it so frustrating for me........

Most of the Germans I talk to think that its a bad idea that Germany entered the EU in the first place. And it IS unfair that we have to pay for other countries' mistakes?!?!?! That's so true. Stop feeding the cancer. Time for TOUGH love! I love those words.
01:37 May 19, 2010 by munchau
Cheerios. I diagree The EU has been good for Germany but we have unfairly exploited our socialist brothers to the South. We have leant them too much money to buy our exports and we have have grown fat on those export surpluses. Now we much re lend that money to the likes of Greece to keep them from devaluing a drachma. I vote for more EU intergration just as we unified Germany (maybe we pay a more tax) but now we can unify Europe and we can control this from Brussels as Merkel shows she has control of monsieur Sarkozy
01:40 May 20, 2010 by Prufrock2010
Don't forget, the U.S. is on the hook for this, too. Big time. These loans are backed up by the Fed.
15:16 May 21, 2010 by munchau
The US fed has made a senior loan to the ECB - its unlikely that the ecb will default on the dollar loan - the ecb is to gives these dollars on loan to weak european banks who are losing funding from strong amercian banks, The amercan banks are looking for outsized bond exposures to PIIGS. If a bank has such exposure it is losing its funding in US money markets. Net the US is not really on the hook for a loan to the Euro govts to bail out the PIIGS - the ECB is actually on the hook and it may have to sell is dollars or its gold if worse came to worse to settle the dollar loan from the Fed.

LIBOR/OIS spreads blowing out again today. [This reflects the credit risk in the system as it consists of the spread between 3-month LIBOR (unsecured linding) and 3-month Fef Funds expectations
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