BERLIN (MNI) – The rescue funds set up by the EU and the IMF
together with the bond purchasing program of the ECB will be sufficient
to deal with the sovereign debt crisis in the Eurozone, ECB Governing
Council member Axel Weber said Thursday.

Speaking at a conference here, Weber said the outstanding public
debt of Greece, Ireland, Portugal and Spain amounts to E1,070 billion.
He then added up the EU rescue funds for Greece (E110 billion), for the
Eurozone as a whole (E500 billion) as well as the IMF fund for the
Eurozone (E250 billion) and the bonds the ECB has purchased so far (E65
billion).

This means that under a worst case scenario — that these four
countries would not be able to refinance themselves on the markets
anymore — the combined efforts would be E145 billion short, Weber said.
“I’m firmly convinced that the euro will not fail due to this
difference,” the central banker stressed.

Moreover, it is completely unlikely that such a worst case scenario
would really materialize, Weber said.

“The euro is not at risk,” he stressed, arguing that the Eurozone
is not experiencing a currency crisis, but a crisis of budget policies.
“The euro is one of the most stable currencies of the world,” he said.

The Eurozone is a project to last over the long term and there is
no way back to the old system of national currencies, Weber underlined.

The Bundesbank president reaffirmed that under a future permanent
EU crisis mechanism — after the temporary funds run out in 2013 —
creditors should participate in bailouts of Eurozone member states.

“The details [of such a new crisis mechanism] have to be presented
as soon as possible,” he demanded. “This would calm markets.”

Commenting on global imbalances, Weber argued that the best way to
reduce them is by having currency regimes in the world which reflect the
economic fundamentals.

Turning to the domestic economy, the Bundesbank president predicted
that the German deficit will fall back to 2.5% of GDP next year after an
expected deficit of 3.5% this year. Total debt will climb to above 80%
of GDP in 2011 after a projected 74% in 2010, he said.

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

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