Merkel defends Euro as Greece sinks deeper into junk
Published 02/06/2011 | 10:20
German chancellor Angela Merkel has defended the stability of the euro but said some countries had to improve their competitiveness and their "fiscal responsibility".
As the EU prepared to provide more aid to Greece on top of the €110 billion already agreed, Chancellor Merkel told an economic forum in Singapore that Europe doesn't "have a problem with the euro as such. It is a stable currency, particularly if you look at it vis-a-vis the dollar."
However, she said that individual countries, which she didn't name, did have "a competition problem, a competitiveness problem" which was having an impact on the currency.
"So this is why we have said right from the start we need to boost competitiveness and we need to put fiscal responsibility and fiscal soundness at the very heart of our efforts.
"Because the competitiveness of the member states in the euro area is too disparate, some of them are too weak as regards their competitive situation and the question is obviously how can we overcome this crisis.”
Chancellor Merkel supported French finance minister Christine Lagarde's bid to become the next leader of the International Monetary Fund.
"If I look at the persona, Christine Lagarde as a finance mnister enjoys an excellent reputation worldwide. I hope that emerging countries will take an objective and unbiased look at her.”
Meanwhile Greece has been further downgraded by credit rating agency Moody's with a rating on Greek bonds that pushes them further into junk status.
Greece is now at the very bottom of Moody's league table of credit-worthy European countries. The three-notch-downgrade takes it from B1 to Caa1, giving the country a worse credit rating than Montenegro.
Moody's said it was very concerned about Greece's "highly uncertain growth prospects" and warned that the embattled country is "increasingly likely to fail to stabilise its debt ratios" by the deadline set by its previous €110bn (£96.7bn) bailout.
It came as German ministers were forced to reassure the market that the EU and the IMF were committed to the bailout. Martin Kotthaus, a German finance minister, said: "It was designed jointly. It will be evaluated jointly, and I also assume that it can only be continued jointly, including when it comes to the question of payouts of future tranches."
Greece is due to receive a €12bn injection from Europe and the IMF on June 29 as part of the international bail–out programme. Delivery of the cash is subject to a progress report on asset sales and spending cuts by the international authorities.