Sarkozy says bets against euro will lose money
Updated: 12:01, Thursday, 27 January 2011
The French President says investors who bet against the euro will get their fingers burned.
1Investors who bet against the euro will get their fingers burned because France and Germany are utterly determined to defend the currency, French President Nicolas Sarkozy said today.
Sarkozy, who chairs both the G20 global economic forum and the Group of Eight major industrialised economies, told the World Economic Forum in Davos that Paris and Berlin would take new steps in European economic integration in the coming weeks.
'To those who would bet against the euro, watch out for your money because we are fully determined to defend the euro,' he said.
'Mrs (German Chancellor Angela) Merkel and I will never - do you hear me, never - let the euro fall,' he told the assembled business and political leaders.
'To imagine we would abandon it is to understand nothing about the psychology of European countries that fought each other in wars for decades. This is an issue of (European) identity,' Sarkozy said.
His call for a new international monetary system has met a cool response from the US, which sees it as a drive to undermine the dollar's dominance. But Sarkozy said no one was trying to undermine the dollar which would remain the world's main reserve currency.
Business leaders cautiously optimistic on euro zone
European executives attending the Davos forum voiced cautious optimism that the euro zone debt crisis will be resolved without contagion spreading to Spain or investors being forced to take unbearable losses.
Policymakers from the US, the European Union and the financial sector are due to focus on Europe's debt woes at a series of private meetings and discussion panels at the annual World Economic Forum later today.
But a year after the Greek fiscal crisis dominated Davos, leading to bail-outs for Greece in May and Ireland in December, business leaders say expectations are growing that the EU is readying effective action to help weaker members of the single currency area and restore confidence in the financial sector.
'We're positive the euro will continue to exist as a currency and the euro zone countries will work out their problems overall,' Dieter Wemmer, chief financial officer of insurer Zurich Financial said.
Private bondholders might be asked to take a write-down, known as a haircut, on some southern euro zone countries' sovereign bonds, he said, but it would not entail big losses.
EU leaders are expected to adopt a comprehensive package of measures at a summit in late March involving reforms to its rescue fund, tougher fiscal discipline rules and commitments to structural economic reforms to improve competitiveness.
In an interview with Reuters Insider television yesterday, European Central Bank Jean-Claude Trichet called for a strengthening of the €440 billion European Financial Stability Facility 'both in quantity and in quality'. He said the fund should be made as flexible as possible and allowed to buy troubled countries' bonds.
The ECB has bought €76.5 billion in Greek, Irish and Portuguese bonds since May to stabilise the euro zone bond market, as well as providing cheap liquidity to those countries' banks. But it is looking to exit those emergency policies.
Many economists say Greece's debt burden is unsustainable and will have to be restructured or rescheduled sooner or later. Athens hotly denies any such intention but is pressing for more time to repay its €110 billion EU/IMF rescue package and a lower interest rate.
Martin Sorrell, CEO of WPP, the world's biggest advertising company, said he was struck by the increased faith among economists and executives in the euro zone's ability to overcome its problems.
'One thing about Davos is there seems to be a bit of restrained optimism,' he said, noting that even sceptics such as US economist Nouriel Roubini were more upbeat on the euro zone.