UPDATE 2-Euro will survive -ECB's Weber

Published 11/24/2010, 04:21 PM
Updated 11/24/2010, 04:24 PM

* Weber convinced euro currency will survive debt crisis

* Euro zone fund big enough to see off speculative attack

* Weber says other euro states don't have Ireland's problem (Recasts, adds quotes, detail)

By Paul Taylor

PARIS, Nov 24 (Reuters) - European Central Bank Governing Council member Axel Weber said on Wednesday he was convinced the euro would survive and that a financial safety net created by euro zone governments would be enough to withstandspeculators.

Weber, also president of Germany's central bank, said he believed euro zone states could come up with more money if the existing 750-billion-euro safety net ever proved insufficient.

Weber, who was speaking at a German Embassy dinner in Paris, said reintroducing Germany's former Deutschemark currency would not be an alternative to the euro, which was launched in 1999.

"We can't afford for this quantum leap forward to be called into question by the markets," Weber said, referring to the European integration brought about by the single currency.

"We must do everything to ensure the sustainability of the euro," he said. "There's no way back. What has grown together cannot and must not be split apart by a financial crisis."

Ireland, which has become the second euro zone member after Greece to succumb to a painful debt crisis, announced plans on Wednesday to slash welfare spending and hike taxes to help pay for its banking crisis and meet the terms of an international bailout.

Fears that Ireland's debt and budget crisis could spread to other euro zone countries such as Portugal and Spain have shaken faith in the currency's future and prompted a sharp sell-off in the euro in recent days.

"I am convinced euro zone states will do what is necessary to protect the euro," Weber said, adding that "750 billion euros should be more than enough to see off an attack on the euro zone. What we are seeing now is an opportunistic attack on the euro."

FLARING TEMPERS

Weber told the dinner that markets ought to be able to see that other euro zone states do not have the same problems as Ireland or Greece, whose budget crisis in early 2010 sent shockwaves across euro zone debt markets.

Tempers have flared across Europe over the financial and social cost of rescuing Ireland, which had enjoyed an economic boom in recent years driven in part by an ultra-low corporate tax rate that attracted droves of businesses from abroad.

Asked about Ireland's corporate tax rate, which several euro zone partners see as unfair and want addressed, Weber replied that it would be unwise to interfere in countries' budgets.

"It would not be good to prescribe to Ireland in detail how they manage their budget policy," he said.

Weber also said in his speech that euro zone countries should waste no time in cutting their budget deficits and should not fear that this would endanger their recovery. For more, see: [ID:nSLAOME6J2]

"First consolidation steps have already been introduced," Weber said. "Now they must be continued: In countries whose fiscal capacity has been questioned in the financial markets, as well as in all other countries."

Weber said an EU agreement to cut deficits by at least 0.5 percent of gross domestic product should be the absolute minimum requirement, and said this should not crimp growth.

Weber is widely seen as a possible candidate to succeed Jean-Claude Trichet as ECB head a year from now, but he dodged questions on the matter, describing himself as a modest technocrat.

"Let's not fantasise about the future. Let's stick to what functions people have now," he said. "Please judge me on the function I have now. I'm president of the Bundesbank." (Writing by Vicky Buffery; Editing by Dan Grebler)

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