The Prime Minister of Luxembourg and chairman of the Eurogroup Jean Claude Juncker made stark remarks on the
“disturbingly large amount of the German debt,”
which the Bonn paper General Anzeiger published on Thursday.
“‘Germany has a higher debt than Spain. But nobody here wants to acknowledge this,’ said Juncker, who expresses understanding regarding the fears of Germany caused by the current financial crisis.
“‘Here (in Germany) they witnessed, twice, the total destruction of all people’s savings unable to do anything about it,’ Juncker said as he referred to last century’s hyperinflation of the 20’s and the financial collapse at the end of World War II.”
German public debt is 83 percent of GDP, but the return on ten-year bonds on Wednesday was 1.78 percent. Despite all this, the president of the Eurogroup believes there is no danger of inflation or a collapse of the euro area:
“there is no reason to believe that savings may enter a danger zone.”
He also noted that Greece is on track in the consolidation of its budgets, while admitting that
“it isn’t straight as it could be so as to see the light at the end of the tunnel.”
After describing as “theoretical” the hypothetical exit of Greece from the euro, he warned that such a possibility would lead to a catastrophic scenario, for the Hellenic country would have to pay its debt in euros while the drachma would lose 60 percent of its value.
Luxembourg’s Prime Minister also believes that Britain will not be able to offer resistance to an effective market regulation at European level for long.
“Eventually there will be no extraordinary exceptions for Britain,”
pointed out the head of the Eurogroup, who emphasized that the Europeans can not become a toy of the financial markets. Juncker made no explicit comments on the new Italian government’s chances of success and noted that the Italians must now start to work together on the reforms.