BERLIN (MNI) – German Chancellor Angela Merkel on Thursday again
stressed her determination to make creditors participate in future
bailouts of Eurozone member states when the current EU rescue funds
expire in June 2013, but she stressed that this will not apply to
existing government bonds.

When creating a permanent crisis mechanism “one has to pay
attention not to eliminate market mechanisms completely,” Merkel said at
a conference here. “We are all of the opinion that market mechanisms —
that is, for example, different interest rates — can have a
disciplinary effect.”

Merkel acknowledged, though, that financial markets are currently
very nervous.

“I want to make this very clear here: [we're talking] about the
functioning of a future crisis mechanism, and not about bonds which have
been issued under the current temporary crisis mechanism…which have a
maturity beyond 2013,” she explained. “Rather, is about bonds issued
after the temporary mechanism has run out in 2013.”

One possibility to assure that investors carry part of the losses
in future could be to include collective action clauses in government
bonds, Merkel said.

“But I see at the moment no case at all of a Eurozone member state
which could enter a situation which would make a restructuring [of its
government bonds] necessary,” the Chancellor said.

The stability culture in the Eurozone is currently better than
before the crisis, she argued.

Germany has profited the most from the common currency, Merkel
stressed. “That is why Germany is naturally ready to engage itself in
solidarity for the euro,” she vowed. “Germany has an interest that the
euro is a strong, a lasting and an accepted currency.”

Turning to the domestic economy, Merkel cautioned that despite
current strong growth rates, GDP will reach its pre-crisis level at
earliest at the end of next year. “That means the crisis is not yet
behind us,” she said.

“I see the danger that different kinds of protectionism could
occur” across the globe, Merkel warned, noting that it is more likely
that this will be non-tariff instruments.

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

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