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UPDATE 1-Weak euro states may have "fatal" impact-German Min

Published 01/28/2010, 04:11 AM
Updated 01/28/2010, 04:15 AM

* There should be no collective bail-out - Bruederle

* Economic policy must be better coordinated in Europe

(Adds quotes, details)

BERLIN, Jan 28 (Reuters) - A number of countries using the European single currency are exhibiting "dangerous" weakness which may have a fatal impact on the remainder of the euro zone, German Economy Minister Rainer Bruederle said on Thursday.

"Some euro states are showing dangerous weakness. This may have fatal effects on all states in the euro zone," he said in a speech to the Bundestag lower house of parliament.

Surging budget deficits in some euro zone memeber states, such as Greece and Portugal, have shaken bond markets and piled pressure on the euro currency.

To applause from assembled lawmakers, Bruederle said that each member state had to take responsibility for itself.

"There should not be a collective bail-out for lopsided developments at national level," he said.

Because of these imbalances, he said economic and financial policy in Europe needed to be better coordinated.

"The EU needs a close exit strategy from the emergency measures adopted. However, we can't have the nucleus of a European economic government take shape from this," he added.

Bruederle said he was optimistic the European Central Bank would choose the right moment to begin withdrawing the "unorthodox" measures taken to support the economy. This would head off the risk of an inflationary spiral, he added.

Much depended on how Germany faced up to its financial and economic responsibilities, the minister added.

"We are a country that has to take a leading role for Europe's economic stability," he said. "And we will do that."

Bruederle also said banks needed to shoulder their fair share of the costs of the financial crisis.

(Reporting by Dave Graham and Brian Rohan; Editing by Toby Chopra)

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