PARIS (MNI) – The European Financial Stability Fund should be
sufficient to dissuade markets from speculating against the solvency of
Eurozone member countries, and if not, more money will be provided,
European Central Bank Governing Council member Axel Weber said
Wednesday.

Financial markets suffer from “limited rationality” and players
often follow market movements to the neglect of “fundamentals,” the
president of the Bundesbank noted at a conference here.

It should be “easy to convince markets” with the EFSF backstop that
speculation against governments will not be successful, Weber argued.
The facility provides for up to E440 billion in government-guaranteed
loans, which is in addition to a pre-existing E60 billion EU emergency
fund. The IMF has also pledged up to E250 billion, bringing the total
pot to E750 billion. Weber said he was convinced that if the E750
billion is not enough, Europe’s political leaders “will do more.”

The sovereign debt crisis is not a crisis of the euro or the
Eurozone, but rather one of individual countries, he stressed. The
structural problems of Greece and Ireland are not comparable to those of
other members, he insisted.

EMU member states should retain as much sovereignty as possible in
fiscal matters, Weber argued. Rather than demand that Ireland harmonize
its 12.5% corporate profit tax with the higher rates elsewhere, EMU
conditionality should focus on the bottom line — the country’s deficit
and debt.

In the end, “the crisis will be positive for the Eurozone,” since
it will oblige the governments to extend their surveillance structures
and establish a permanent mechanism to deal with future crises, which
will “certainly” occur, Weber predicted.

In response to Eurosceptics, Weber argued that acceptance of
monetary union is no longer an issue for younger generations with no
experience of the previous currencies. “The D-mark would be no
alternative to the euro!”

Only a decade after the foundation of EMU, it is still too early to
estimate its long-term impact on growth, he said.

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