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Merkel ups heat on Greece, rebuffs Brussels

The Local · 23 Nov 2011, 14:37

Published: 23 Nov 2011 11:26 GMT+01:00
Updated: 23 Nov 2011 14:37 GMT+01:00

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In a wide-ranging speech in the Bundestag lower house of parliament, Merkel said: "The Greek question has still not been cleared up because we have not seen the criteria met for the payment of the next tranche" of bailout loans.

Greece needs an €8-billion ($11-billion) pay-out by December 15 to avoid bankruptcy but the conservative group in the three-party unity government has refused to sign a reform pledge the EU says is needed for the funds.

"We need not only the signature of the Greek prime minister, but also the signatures of the parties that have formed a government in Greece, otherwise there can be no payment of the next tranche," said the chancellor.

And Merkel persisted with her firm veto on allowing the ECB to step up its purchase of the bonds of distressed eurozone nations, insisting on the independence of the central bank and its sole mandate - to fight inflation.

"The economic and monetary union is based on a central bank which has as its sole responsibility the maintaining of price stability," stressed Merkel. "That is its mandate, it is carrying it out ... and I am firmly of the opinion that this mandate should not, absolutely not, be changed," added the chancellor to loud applause.

Merkel also took aim at the European Commission, which is preparing to launch proposals for eurobonds, which many believe could be an effective response to the eurozone debt crisis.

She said she found it "extremely worrying" and "inappropriate" that Brussels was publishing its eurobond proposal as if what she called the weaknesses of the eurozone framework could be solved by pooling eurozone debt.

"This will not work," she said.

Later Wednesday, Commission President Jose Manuel Barroso will unveil a radical set of reforms designed to toughen the policing of member states' budgets, laying the ground for the potential introduction of eurobonds.

However, Germany fears its ultra-low borrowing costs would rise sharply if its debt were pooled with other, less fiscally solid countries such as Italy, Spain and Greece.

But investors shunned Wednesday an issue of German 10-year bonds, considered the gold standard of eurozone debt, as the crisis continued to simmer.

Germany received bids for only €3.9 billion of its 10-year Bund, despite offering €6 billion, in what the German Finance Agency called a "reflection of the extraordinarily nervous market conditions."

"It doesn't mean any refinancing bottleneck for the budget," insisted Jörg Müller, a finance agency spokesman.

However, analysts worried that the eurozone debt crisis was beginning to slip into the very core of the 17-nation zone, as the euro dropped sharply on the foreign exchange markets after the auction.

"There's been a lot of talk lately that perhaps Germany isn't the safe-haven that many people thought it was," said UBS currency strategist Chris Walker.

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Danske Bank chief analyst Jens Peter Sorensen said the auction "reflects the deep mistrust to the euro project rather than a mistrust to German government bonds."

He said: "As some investors say regarding the euro project - 'if it is broke, then fix it'."

At VTB capital in London, economist Neil MacKinnon commented that in the "latest bad news for the eurozone ... Germany fails to get bids for 35 percent of 10-year bonds at this morning's auction."

He also noted from a document on the website of the European Central Bank that "the ECB is to lend $552 million to two un-named eurozone banks in a 6-day tender: the crisis is getting worse."

AFP/The Local/mry

The Local (news@thelocal.de)

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Your comments about this article

17:53 November 23, 2011 by Bill Simpson
Some experts said on CNBC TV Wednesday morning in the USA, that Europe has LESS than 3 months to start printing about 3 TRILLION euros, or your entire banking system will completely collapse. They all agreed that the crisis over there was MUCH worse than the 2008 crisis in the USA. If Merkel resists too long, have some canned food stored. If you own stocks they could go to near 0 if banks shut down because they have no money. The European banks are having trouble borrowing money already. I say inflated money sure beats no money. These guys looked very worried, saying how the global financial system came within hours of collapsing after Lehman Brothers declared bankruptcy. Then the US Federal Reserve bank guaranteed all US debt to stop the bond vigilantes attacks. Good luck.
18:27 November 23, 2011 by Beachrider
This are treacherous waters for the Eurozone. Collapse in Greece now seems inevitable. The impact on borrowing rates for other Eurozone countries is no longer in doubt. The time to argue is past. It is now time to strategize the paths of the various Eurozone countries.

It is not certain that this means the end of anything, it is certain that it will be very different in 30 days. The change looks scary, but the foundation of the German economy should provide a non-catastrophe for the population.

Hold on...
14:14 November 24, 2011 by coffejohn
This is starting to look like a stand off between Germany and the US.

Germany seems to be taking the view that it was the US that started this fiscal crisis and it is up to them to solve it, or pay for it.

I am not sure that the US will accept this argument.
14:33 November 25, 2011 by christopheuk25
When will you idiots face the fact the Euro is doomed to be followed shortly by the EU money eating monster.The whole concept of a Communist European Union and a single currency for all was the usual head up the arse idea of Left Wing/Liberal cretins.It could never had worked as the whole World can now clearly see,a preposterous ideal fostered by the mentally unstable and forced onto an equaly stupid lazy and ignorant public.Now the World pays for these imbeciles
13:49 November 27, 2011 by storymann
The stability of the Euro Zone , is of major importance to the Asian and US economies, if the Euro Zone collapses, it will most likely bring down the US economy as well, sending it into deep a depression.
14:31 November 27, 2011 by raandy
That's ridiculous the USA didn't start the crisis ,GREED was the culprit and Europe bought in to those hedge funds and sub prime mortgages full tilt,DB was one of the big buyers and lender,s and they are now under investigation and being sued for 1 billion for defrauding the government by repeatedly lying to obtain federal insurance guarantees on mortgage debt. They along with other greedy banks are responsible for the crisis.
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