Monday

3rd Oct 2022

Merkel warns euro in 'serious condition'

German Chancellor Angela Merkel on Tuesday (23 November) warned that the euro is in an "exceptionally serious" situation as the European Commission issued a veiled warning to the Irish political class not to topple the government.

"I don't want to paint a dramatic picture, but I just want to say that a year ago we couldn't imagine the debate we had in the spring and the measures we had to take," she said in a speech in Berlin to the Confederation of German Employers, the BDA.

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"We are facing an exceptionally serious situation as far as the euro's situation is concerned."

The single currency continued to decline on the back of her statement, falling 1.3 percent to $1.344 by late afternoon, while premiums on bonds in peripheral euro-area states also rose, with Spanish 10-year bonds up 12 percentage points higher, at 4.87 percent and Portugal's up seven percentage points to 6.88 percent.

Meanwhile, EU economy commissioner Olli Rehn issued a veiled warning to Irish opposition politicians not to topple the government.

Speaking to reporters in Strasbourg asking about worries the Fianna Fail-Green government in Dublin could fall, Mr Rehn said: "Stability is important."

"We don't have a position on the domestic democratic politics of Ireland but it is essential that the budget will be adopted in time and we will be able to conclude the negotiations on the EU-IMF programme in time."

"The budget needs to be adopted," he said. "Ireland will pass the budget in the time foreseen and certainly sooner than later."

For his part, the Danish prime minister, Lars Lokke Rasmussen, announced that his government would participate in the eurozone bail-out of Ireland alongside fellow non-euro-using states Sweden and the UK.

Mr Rasmussen said that he had backing from MPs, according to a Bloomberg report.

The move follows on from comments by the Swedish finance minister on Monday, who urged Denmark, as well as non-EU nations Switzerland and Norway should also put their shoulders to the wheel.

"The financial stability of Europe is at risk so it is very important to make a broader effort to try to stabilise the situation," he told the Financial Times.

Norway's finance minister, Sigbjørn Johnsen, responding to the call, said in a statement that it will support Ireland through the International Monetary Fund and hinted that if asked directly, it could come up with additional support.

"Norway will contribute to the financing of the IMF part of the loan package to Ireland through the financing arrangements we already have in place with the IMF, including our bilateral loan agreement with the IMF," he said."

"We have not received any request for additional financial support. If we receive a request from Ireland for a bilateral loan, we will of course consider it."

Analysis

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