Merkel: Fiscal compact not enough to save euro

German Chancellor Angela Merkel has said that the EU Fiscal Treaty won't be enough on its own to save the euro.

German Chancellor Angela Merkel has said that the EU Fiscal Treaty won't be enough on its own to save the euro.

Speaking in Berlin today following a meeting with British Prime Minister David Cameron, Chancellor Merkel said other measures such as re-capitalisation of banks will also be necessary.

"The fiscal compact… can create and can be a necessary pre-condition but it will not be sufficient in itself," she said.

"Acute instruments to deal with the crisis are there… recapitalisation of banks is possible.

"Taking a look at the medium- and long-term perspective we need greater coherence, not only in the area of fiscal policy but also in other areas, too."

Her comments come amid continuing uncertainty in the eurozone and mounting pressure for a deal to recapitalise the struggling Spanish banking sector - pressure which will have eased somewhat following Madrid's raising of €2.1bn in a bond auction today.

With the re-run Greek election on June 17 followed by crucial summits of the G20 in Mexico and the European Council in Brussels, political leaders are nonetheless being pressed for concrete action by the end of this month.

Meanwhile speaking ahead of his meeting with the Chancellor, Mr Cameron pledged that he will not ask British taxpayers to underwrite the debts of ailing banks in Greece and Spain.

Mr Cameron has put his weight behind proposals for closer fiscal union between the 17 eurozone nations – perhaps by the issue of eurobonds which would allow them to share the burden of debts.

But he today left no doubt that Britain would not be involved in any such arrangement.

“I wouldn’t ask British taxpayers to stand behind the Greek or Spanish deposits," he said.

“It is not our currency, so that would be inappropriate to do."

Chancellor Merkel has previously indicated that it would be wrong to establish eurobonds unless they are accompanied with closer fiscal union between eurozone states.

She said at the weekend: “You can’t demand eurobonds but not be prepared for the next step in European integration. We won’t be able to create a successful currency like that and no-one outside will lend us money any more.”

Meanwhile Taoiseach Enda Kenny today said he will not be disclosing the details of discussions he has with other heads of State.

Opposition leaders pressed Mr Kenny in the Dáil yesterday to reveal what Chancellor Merkel said to him during a telephone conversation between the two that followed the Yes vote in last week's treaty referendum.

However the Taoiseach refused to outline what she had to say on the Government's efforts to reduce Ireland's bank debt.

Mr Kenny said he was not about to conduct negotiations or international relations by having press conferences on the content of such conversations.

"It's not for me to disclose the details of conversations I have with any heads of government," he said.

"Last week I spoke with Prime Minister Monti (Italy), President Hollande (France), Chancellor Merkel, Mariano Rajoy (Spain) and the presidents of the (EU) Council and Commission.

"And nobody asked me what any of these people said."

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