We Won't Let Anyone Go Bust

A senior German lawmaker said euro zone states stood ready to come to the aid of financially fragile members of the currency bloc, sparking furious denials from European leaders that a specific rescue plan existed. Otto Bernhardt, a leading lawmaker in Angela Merkel's Christian Democrats (CDU), told Reuters in an interview late on Thursday: "There is a plan."

He added: "The finance ministers have agreed the procedures. The core point is: 'We won't let anyone go bust'." Speculation has grown in recent weeks that stronger members of the 16-nation euro zone, like Germany, could step in at some stage to help ailing partners. But officials have been reluctant to speak openly about how this aid would work for fear of aggravating problems in ailing euro economies like Ireland and Greece. Bernhardt's comments triggered a fierce response from political leaders around Europe.

The prime ministers of Italy, Ireland and Greece said no plan had been agreed to bail out euro zone countries and German Finance Minister Peer Steinbrueck also said he could not confirm the veracity of Bernhardt's remarks. Bernhardt also later contacted Reuters to qualify the comments he gave in the interview. He said in the conversation on Friday that although politicians were obliged to formulate a broad plan of action he knew of no blueprint to address a country in trouble now.
"My main point stands: A euro country cannot go bankrupt, because the currency would collapse," Bernhardt added.

In the Thursday interview, he said that of all the euro zone states, Ireland was in the "worst situation of all", followed by Greece. He made clear that any aid would come at a price. "We would look very closely at past sins," Bernhardt said. "We will not tolerate there being low-tax countries like Ireland for example. We will insist on a minimum corporate taxation rate."

Countries such as Ireland and Greece have been hit hard by a sharp economic downturn and are now being forced to pay hefty premiums over stronger bloc members to finance their debt, aggravating their financial troubles. Irish Prime Minister Brian Cowen dismissed the comments by Bernhardt, and Greek Prime Minister Costas Karamanlis denied the existence of such a plan. Italian Prime Minister Silvio Berlusconi said that while there was no plan to rescue weaker members, any euro zone country in trouble would be shown solidarity by other members.

Jean-Claude Juncker, Luxembourg Prime Minister and head of the Eurogroup finance ministers' forum, also said the euro zone would be able to respond immediately if one of its members risked a default. "If it ever did happen -- it won't happen -- the euro zone would be able to provide a response in a few hours," he said. Asked what the likelihood was that a euro member would need to be supported, Bernhardt had said: "It depends on how the international crisis develops. It could be that they (Ireland) can manage without getting credit." "But the chances we will need to help are greater than the chances that we will not need to help," he added.
Steinbrueck has acknowledged that Berlin stands ready to help weaker euro members but he again underlined on Friday that no euro zone country currently faced payment problems.

Bernhardt said in the Thursday interview that the danger for Germany of not helping would outweigh the cost of helping: "What is the alternative? We would otherwise lose our currency."

A senior German lawmaker said euro zone states stood ready to come to the aid of financially fragile members of the currency bloc, sparking furious denials from European leaders that a specific rescue plan existed.

Otto Bernhardt, a leading lawmaker in Angela Merkel's Christian Democrats (CDU), told Reuters in an interview late on Thursday: "There is a plan."

He added: "The finance ministers have agreed the procedures. The core point is: 'We won't let anyone go bust'."

Speculation has grown in recent weeks that stronger members of the 16-nation euro zone, like Germany, could step in at some stage to help ailing partners.

But officials have been reluctant to speak openly about how this aid would work for fear of aggravating problems in ailing euro economies like Ireland and Greece.

Bernhardt's comments triggered a fierce response from political leaders around Europe.

The prime ministers of Italy, Ireland and Greece said no plan had been agreed to bail out euro zone countries and German Finance Minister Peer Steinbrueck also said he could not confirm the veracity of Bernhardt's remarks.

Bernhardt also later contacted Reuters to qualify the comments he gave in the interview.

He said in the conversation on Friday that although politicians were obliged to formulate a broad plan of action he knew of no blueprint to address a country in trouble now.

"My main point stands: A euro country cannot go bankrupt, because the currency would collapse," Bernhardt added.

In the Thursday interview, he said that of all the euro zone states, Ireland was in the "worst situation of all", followed by Greece. He made clear that any aid would come at a price.

"We would look very closely at past sins," Bernhardt said. "We will not tolerate there being low-tax countries like Ireland for example. We will insist on a minimum corporate taxation rate."



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Countries such as Ireland and Greece have been hit hard by a sharp economic downturn and are now being forced to pay hefty premiums over stronger bloc members to finance their debt, aggravating their financial troubles.

Irish Prime Minister Brian Cowen dismissed the comments by Bernhardt, and Greek Prime Minister Costas Karamanlis denied the existence of such a plan.

Italian Prime Minister Silvio Berlusconi said that while there was no plan to rescue weaker members, any euro zone country in trouble would be shown solidarity by other members.

Jean-Claude Juncker, Luxembourg Prime Minister and head of the Eurogroup finance ministers' forum, also said the euro zone would be able to respond immediately if one of its members risked a default.

"If it ever did happen -- it won't happen -- the euro zone would be able to provide a response in a few hours," he said.

Asked what the likelihood was that a euro member would need to be supported, Bernhardt had said: "It depends on how the international crisis develops. It could be that they (Ireland) can manage without getting credit."

"But the chances we will need to help are greater than the chances that we will not need to help," he added.

Steinbrueck has acknowledged that Berlin stands ready to help weaker euro members but he again underlined on Friday that no euro zone country currently faced payment problems.

Bernhardt said in the Thursday interview that the danger for Germany of not helping would outweigh the cost of helping: "What is the alternative? We would otherwise lose our currency."