Sat, Aug 18, 2012 - Page 15 News List

Merkel’s support of ECB boosts markets

‘COMPLETELY IN LINE’:The German chancellor told a press conference in Ottawa that the eurozone needs to act swiftly to tackle its problems, but it is on the right track

Reuters and AFP, LONDON and HONG KONG

German Chancellor Angela Merkel speaks as Canadian Prime Minister Stephen Harper listens during a press conference in the Canadian parliament in Ottawa on Thursday. Merkel wrapped up a two-day official visit to Canada on Thursday.

Photo: AFP

Global shares hit multi-month highs yesterday, with top European stocks and the euro both lifted by support from German Chancellor Angela Merkel for European Central Bank (ECB) intervention to calm the eurozone’s debt troubles.

Merkel said declarations by ECB President Mario Draghi, who outlined conditional plans at the start of the month to buy bonds of troubled euro zone governments, were “completely in line” with the approach taken by European leaders and urged the bloc to now act swiftly to tackle its woes.

Merkel also said European leaders are making progress.

“We know in the common currency area there has to be more responsibility shared politically. I also underline that in many of these issues we feel we are on the right track, although time is pressing. We are very much aware of this,” she said at a press conference with Canadian Prime Minister Stephen Harper on Thursday in Ottawa.

Her comments helped lift Wall Street on Thursday, with the blue-chip Dow Jones Industrial Average finishing 0.65 percent higher at 13,250.11.

Hopes the bloc may finally be getting a grip on its problems lifted top European shares 0.14 percent in early trading yesterday.

The main indexes in London, Paris and Frankfurt were all in positive territory, helping the MSCI index of global shares to extend an 11.5 percent gain that started back in June. The euro was buoyant at US$1.2364, not far from Thursday’s high of US$1.2373. The single currency also hit a six-month high versus the yen.

Asian markets were mostly higher yesterday as Merkel’s comments were seen by traders as a sign she could be warming to the idea of the ECB buying up bonds of troubled sovereign states such as Spain and Italy, which have seen their borrowing costs soar to danger levels recently.

Tokyo’s Nikkei added to the previous day’s healthy gains, advancing 0.77 percent, or 69.74 points, to 9,162.20 as the yen eased further against the dollar with dealers confident enough to move out of the safe haven Japanese unit.

Sydney climbed 0.92 percent, or 39.9 points, to 4,370.1 but Seoul eased 0.58 percent, or 11.37 points, to 1,946.54.

However, Finland’s foreign minister, Erkki Tuomioja, said European leaders must prepare for the possibility that the eurozone breaks up.

Tuomioja said in the Daily Telegraph yesterday that Finnish officials have prepared for the break up of the single currency with an “operational plan for any eventuality.”

“It is not something that anybody — even the True Finns [a Eurosceptic opposition party] — are advocating in Finland, let alone the government. But we have to be prepared,” Tuomioja was quoted as saying.

“Our officials, like everybody else and like every general staff, have some sort of operational plan for any eventuality,” he said.

“This is what people are thinking about everywhere,” Tuomioja said. “But there is a consensus that a eurozone break-up would cost more in the short-run or medium-run than managing the crisis.”

Finland, which has a veto that could be used to block any new bailout measures, has insisted on collateral from both Greece and Spain in exchange for rescue loans.

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