Merkel and Sarkozy insist bailout talks must end soon
German chancellor and French president emphasise again that fund set up to protect the euro will remain unaltered until 2013
German Chancellor Angela Merkel and French President Nicolas Sarkozy said rescue talks with Ireland must conclude quickly and said the bailout fund set up in May to protect the euro will remain unchanged until 2013.
Both agreed that "negotiations with the Irish Government must be brought to a speedy resolution".
They emphasised afresh that the euro's safety umbrella will remain unchanged until 2013.
Contagion from our crisis continues to spread through the euro region, stoking speculation that the euro region's €750bn rescue fund isn't large enough to bail out Spain should that be necessary.
Sarkozy and Merkel, who discussed "current problems in the eurozone," said their governments are working "intensively" on a joint proposal to introduce a "permanent crisis mechanism" for the euro region that will take effect after 2013.
Germany is ready to "act in solidarity" to help preserve the single European currency, Ms Merkel said.
She said Germany wants to see "a strong euro on the markets", adding the 16-nation euro currency will survive the crisis.
Axel Weber, the head of Germany's central bank and a leading rate-setter at the European Central Bank (ECB), said European nations would be willing to boost the emergency fund by as much as €100bn to fully cover the total public debt load of Greece, Ireland, Portugal and Spain.
But when Ms Merkel and Mr Sarkozy discussed the eurozone's troubles on the phone yesterday evening they said the €750bn emergency fund for the euro would remain unchanged until it expires in 2013, German government spokesman Steffen Seibert said in a statement.
Amid the ongoing sovereign debt crisis in the eurozone, the 16-nation currency wallowed near two-month lows against the dollar yesterday trading at $1.3364 -- down from a recent high of $1.4244.
It would drop further as other heavily indebted countries, like Portugal and Spain, risk following Greece and Ireland in needing massive bailouts.
Ms Merkel said the euro currency will survive the debt crisis. "I'm more confident than this spring that the European Union will emerge strengthened from the current challenges.
"We now have a mechanism of collective solidarity for the euro," she said.
"And we all are ready, including Germany, to say that we now need a permanent crisis mechanism to protect the euro," Ms Merkel added.
Experts say that while rescuing Greece, Ireland or even Portugal is manageable for the EU's emergency fund, bailing out Spain -- whose economy is five times larger than any of the other three countries -- would test its limits and threaten the euro's existence.
"The euro is one of the world's most stable currencies," Mr Weber said.
The head of the EU's bailout fund, Klaus Regling, also defended the integrity of the eurozone.
"No country will voluntarily give up the euro -- for weaker countries that would be economic suicide, likewise for the stronger countries," Regling said.
In the markets, investors continued to put pressure on Portugal and Spain, keeping their borrowing costs near euro-record highs.
That reflects market uncertainty about their ability to pay off debts amid an economic downturn -- and fears that they will also need massive bailouts.
Markets demand a higher return on bonds issued by countries seen by them as a risky investment.
The rise in yields threatens to cause trading losses at foreign banks and pension funds that hold Portuguese and Spanish debt, because the value of bond holdings falls as the yields rise.