MercoPress. South Atlantic News Agency

Germany reaffirms commitment to Euro as markets test EU monetary union

Finance minister Wolfgang Schaeuble: Euro lacks a common financial policy

German Finance minister Wolfgang Schaeuble said financial markets are currently testing whether the Euro zone will survive but he insisted the 16-nation monetary union won't break up. However he also warned about the risk of the emergence of an anti-Euro party.

”Financial markets are testing whether the construction of the joint currency area will hold together. Whether it will work having a joint currency, but also leaving financial policy to national (governments) at the same time“ he said.

Interviewed by the German mass-circulation tabloid Bild Schaeuble said that dissolving the Euro zone would be ”immensely more expensive“ than the current support measures. ”Without the Euro every German would be poorer. Without the Euro, the labour market would look a lot worse,“ he said.

The German public has been skeptical about bailing out troubled Euro zone members such as Greece and Ireland. A public opinion poll taken earlier this year showed that 51.4% of Germans would prefer a return to the deutschmark, symbol of German economic and financial power for over half a century.

Schaeuble said that a breakup of the Euro zone would have ”unforeseeable economical consequences“ and lead to more unemployment and troubled banks. He said the Euro is the world's second most important currency but that markets are questioning a monetary union that lacks a common financial policy.

The German minister also cautioned that the danger of an anti-Euro party needs to be taken seriously. He added “this is all the more reason to explain to people what they get out of the Euro. That the Euro protects them from the turbulence of globalization better than a national German currency ever could”.

Schaeuble was speaking as pressure rose on Euro zone governments to boost the size of a rescue fund for crisis-hit member states and avert a new bout of market turmoil that could threaten the stability of the currency.

The veteran politician, who belongs to Chancellor Angela Merkel's Christian Democrats (CDU), said there could be no question of allowing the 16-nation currency union to split, for example, into a north-south divide.

“That would cost us much, much more than everything we're doing now for the Euro now,” he said. “The economy would suffer unforeseeable consequences, and hence a lot of jobs would be at risk. And banks would also face massive problems.”

However London’s The Guardian published that German chancellor, Angela Merkel, warned for the first time that her country could abandon the Euro if she fails in her contested campaign to establish a new regime for the single currency.

At an EU summit in Brussels at the end of October that was dominated by the Euro crisis and wrangling over whether to bail out Ireland, Merkel became embroiled in a row with the Greek prime minister, George Papandreou, according to participants at the event's dinner.

At the Brussels dinner on 28 October attended by 27 EU heads of government or state, the presidents of the European commission and council, and the head of the European Central Bank, witnesses said Papandreou accused Merkel of tabling proposals that were “undemocratic”.

“If this is the sort of club the Euro is becoming, perhaps Germany should leave,” Merkel replied, according to non-German government figures at the dinner. It was the first time in the 10 months since the Euro was plunged into a fight for its survival that Germany, the EU economic powerhouse and the lynchpin of the Euro viability, had suggested that quitting the currency is an option, however unlikely.

Merkel's spokesman Steffen Seibert would not comment on her remarks. But the threat, he said, was “not plausible. The chancellor sees the Euro as the central European project, wants to secure and defend it and the government is not at all thinking of leaving it,” he said. “Germany is unconditionally and resolutely committed to the Euro.”