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UPDATE 1-Bond holders must help keep euro stable-Germany

Published 09/22/2010, 01:35 PM
Updated 09/22/2010, 01:40 PM

* Berlin eager to avoid bearing burden of future crises

* Ruling coalition wants euro zone debt to bear haircut risk

(Adds background, details)

BERLIN, Sept 22 (Reuters) - Investors in euro zone sovereign debt will have to share some of the burden of coping with any future crises affecting the European single currency, German Finance Minister Wolfgang Schaeuble said on Wednesday.

"We need a mechanism so that in future crises we can get the creditors involved in solving the problems," said Schaeuble.

"We won't be able to keep the euro stable as a shared currency if we don't create this kind of mechanism for dealing with the crisis," he told reporters in Berlin.

Germany, which has shouldered the biggest share of risks in a bailout of Greece and a 750 billion euro package assembled to protect the euro currency, has been pushing for the creation of a mechanism to allow the "orderly insolvency" of member states.

The rescue mechanism for the currency is due to run out in mid-2013, and Chancellor Angela Merkel's centre-right coalition is eager to avoid German taxpayers being left on the hook again.

The parties in Merkel's ruling coalition are demanding that once the rescue mechanism expires, any new debt sold by euro zone member states should carry the risk of a "haircut" or discount for investors if the issuers become insolvent.

(Reporting by Matthias Sobolewski)

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