BERLIN (MNI) – German Chancellor Angela Merkel on Wednesday again
rejected the idea of making the ECB the lender of last resort in the
Eurozone’s sovereign debt crisis, acknowledging at the same time that
the resources to protect the euro are limited.

“The ECB is solely responsible for monetary stability,” Merkel said
in a speech in the lower house of parliament, the Bundestag. “It is my
conviction that we should change absolutely nothing on the mandate of
the ECB.”

“This means that the amount of money at hand to build firewalls
will be limited,” the chancellor made clear. “Naturally, we are thereby
somewhat more vulnerable to the markets than those countries which can
print their own money.”

Merkel again rejected proposals to introduce joint eurobonds: “This
won’t work; it’s like putting the cart before the horse.”

The chancellor demanded that the technical details for leveraging
the European Financial Stability Facility (EFSF) rescue fund be agreed
by the end of the month in order to be able to find investors for the
plan. “Without the guidelines one cannot convince investors,” she said.

The planned voluntary 50% haircut on Greek government bonds is the
right thing to do, Merkel asserted, but conceded that this had raised
concerns amongst investors about possible losses on bonds of other
Eurozone states as well.

“That is why it is very important…to make clear that Greece is an
exceptional case,” the chancellor explained.

Merkel remarked that Greece is not out of the woods yet, because
the preconditions for paying out the sixth tranche of EU-IMF aid will
not be met until the opposition has signed the necessary reform and
consolidation commitments.

The chancellor again pushed her idea of an EU Treaty change to make
deficit violators lose some of their sovereignty over national budget
policies. She also called for closer coordination of economic and social
policies in the Eurozone.

Germany will make proposals in that direction at the next European
Council meeting on December 8 and 9, she said.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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