BERLIN (MNI) – Germany’s Finance Minister Wolfgang Schaeuble on
Tuesday said that fiscally ailing Eurozone states must win back the
confidence of investors or suffer dramatic consequences.

“Immediate fiscal consolidation in the highly indebted states is of
the essence,” Schaeuble said at an economic conference here.

“The challenge is not to repair public finances, it is to restore
the trust of investors and citizens in the stability of their
governments’ fiscal policies, otherwise the consequences would be
dramatic and difficult to contain,” the minister warned.

He pointed to an “increasing lack of confidence” in financial
markets that EU leaders will be able to successfully tackle the debt
crisis.

While Schaeuble acknowledged that the Eurozone states had to
support their fiscally ailing peers, he stressed that “solidarity has
its limits.”

“Solidarity can only accompany reform efforts, it cannot replace
them,” he made clear.

Schaeuble again stressed his opposition against stepping up the
European Financial Stability Facility (EFSF) even further, arguing that
this could put the AAA rating of some EMU member states at risk.

“We will use the EFSF in the most efficient way, but we’re not
going against the EU treaties,” he vowed. “You can trust this.”

The minister again turned down calls for debt-financed economic
stimulus programs. “More debt will stunt rather than stimulate growth,”
he argued.

Schaeuble insisted that “for Europe there is no comfortable way out
of the crisis, we have to restrict ourselves to fiscal consolidation.”

“I don’t trust that monetary policy is the way to solve all
problems,” he remarked, adding that the European leaders had given the
European Central Bank full independence for a reason.

The minister warned that the situation could become serious should
the private banking sector be affected by the debt crisis. He explained
that all finance ministers from the EU are to present their backup plans
for banks at the next Ecofin meeting.

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

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