DECEMBER 10, 2010, 4:25 P.M. ET.

Germany Vows Defense of Euro


By MARCUS WALKER And MATTHEW KARNITSCHNIG

BERLIN—German Finance Minister Wolfgang Schäuble vowed that Berlin and other euro-zone governments would do whatever it takes to defend the common European currency and signaled that Germany could move toward a deeper economic union if current attempts to improve the euro zone's governance proved insufficient to end the year-old crisis of confidence.

Transcript: Schaüble on the Euro
"We're not worrying about horror scenarios, we simply say all European countries are determined to keep this European currency stable and we have the means to do it." -- More from the interview
.The comments by Germany's powerful finance chief suggest the country is prepared to go much further than many observers believe to defend the euro. Economists say Germany's political will to stick with the European project, even at a financial cost, will be essential for preventing the unraveling of the euro zone amid capital flight from indebted countries on the zone's fringe.

Mr. Schäuble, a key ally of Chancellor Angela Merkel, dismissed concerns that Germany is becoming disillusioned with the European currency because of the cost of bailing out indebted countries such as Greece and Ireland. He reaffirmed his government's commitment to European integration as Germany's historic responsibility, and said Berlin and other euro-zone governments have both the political will and the financial firepower to defend the euro.

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Thomas Meyer/OSTKREUZ for The Wall Street Journal

German Finance Minister Wolfgang Schäuble vowed that Berlin and other euro-zone governments would do whatever it takes to defend the common European currency.
."All European countries are determined to keep this European currency stable and we have the means to do it," Mr. Schäuble said in an interview. "Sometimes it takes crises so that Europe moves forward. In this crisis, Europe will find steps toward further unification."

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.The 68-year-old conservative, who has served in various German cabinet posts since 1984, said Germans are "far too sensible" to give up on the euro, with its great advantages for an export-dependent nation, because of present troubles on Europe's periphery.

Addressing fears that the debt crisis could spread from small countries such as Ireland and Portugal to major economies such as Spain and Italy, he said: "There will be no domino effect, because we will defend the common currency."

However, Mr. Schäuble also rejected calls from other European countries to announce fresh emergency measures now, such as collective bond issuance or a hike in the size of the EU's bailout funds.

In light of the sovereign debt crisis surrounding the euro, previously outlandish notions of dismantling the euro-zone are gaining a more welcome reception in Germany, a country where many have resented having to bail out Greece. WSJ's Andy Jordan reports.
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Mr. Schäuble said Europe should concentrate for now on explaining the decisions taken so far to financial markets, including the move to set up a European Stability Mechanism from 2013 that could impose losses on bond investors if euro members run up excessive debts. Germany, which pushed through the ESM idea, argues it will help to impose discipline on national budgets.

Write to Marcus Walker at marcus.walker@wsj.com and Matthew Karnitschnig at matthew.karnitschnig@wsj.com

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