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Germany Signals Support for Euro-Zone Members

FRANKFURT — In a shift of tone that may signal more commitment to keep the euro zone in one piece, the German finance minister has ruled out the possibility that any country would ever be ejected from European monetary union, and said calls to restore the Deutsche mark were “unrealistic nostalgia.”

The comments by the finance minister, Wolfgang Schäuble, may indicate that Germany, Europe’s biggest economy, is becoming more willing to finance measures to ensure that countries like Greece and Ireland do not default on their debts. Fears that Germany’s enthusiasm for the euro is waning have contributed to turmoil in global financial markets in recent weeks, as investors increasingly factor in the risk that the euro zone could break up.

Borrowing costs have risen not only for the overly indebted countries, but for healthy countries like Germany as well.

European heads of government are to hold a summit meeting this week when they will to try to establish a permanent mechanism for dealing with debt crises. They are under pressure to convince financial markets that the euro is solid before global bond trading recovers from its December lull. Authorization for the current bailout mechanism, the European Financial Stability Facility, is to expire in 2013. The facility has €440 billion, or $582 billion at current exchange rates, with which to provide bailouts to troubled euro-zone member states.

Along with the German chancellor, Angela Merkel, Mr. Schäuble has often taken a hard line toward the countries that have caused the crisis. In March, he told the mass-market newspaper Bild that it should be possible to eject countries from monetary union that are not able to get their budgets under control.

Such statements seem to be a response to widespread popular resentment in Germany at having to bail out Greece and Ireland. German reluctance to agree to aid measures has slowed European decision making and contributed to nervousness in the financial markets.

But recently German leaders have been trying to reaffirm their commitment to the euro. Guido Westerwelle, the foreign minister, said last week that Germany was determined to defend the euro and “anybody who wants to destroy the euro will realize that he cannot succeed.”

Erik F. Nielsen, chief European economist at Goldman Sachs, wrote in a note Sunday, “Whatever skepticism one might have had, one cannot doubt the political commitment to the European project.”

During an interview with Bild published Sunday, Mr. Schäuble reversed his earlier position on countries quitting the euro zone. “Even if only a small country were to leave, the consequences would be unforeseeable,” he said guaranteed unsecured personal loan.

Referring to the bankruptcy of the U.S. investment bank Lehman Brothers in 2008 that nearly caused a global financial collapse, Mr. Schäuble said, “Let us not make the same mistake twice.”

In contrast to his earlier statements, which seemed to play to popular opinion, Mr. Schäuble, during the Bild interview, emphasized the benefits that Germany enjoyed because of the euro.

He said it angered him when “people who know better” called for a return to the Deutsche mark.

“Anyone who looks at the development of the German economy knows that our international integration is greater than any other economy,” Mr. Schäuble said. “Without the euro our own currency would experience a rise in value with negative consequences for exports.”

Bild, aimed at working-class readers and offering a heavy dose of scandal and sex, is Germany’s most widely read newspaper. It has often helped inflame taxpayer resentment at having to rescue other countries. German politicians often speak to the newspaper when they want to convey a message to the population at large.

Economists point out that Germany is one of the main beneficiaries of the euro. The euro has deprived countries like Italy of the option of devaluing their currencies to obtain a price advantage on world markets. German growth has been among the fastest in Europe this year, and unemployment has been falling.

Mr. Schäuble reiterated that Germany was opposed to issuance of bonds backed by all euro members, saying that countries with weaker financial discipline should be required to pay higher interest rates. Mr. Schäuble said, however, that he was opposed to the idea “under the present structure of the euro area,” leaving open the possibility that new rules for the euro zone might lead Germany to change its position.

On Friday, Mrs. Merkel and President Nicolas Sarkozy of France rejected calls to introduce bonds collectively backed by euro-zone countries. Prime Minister Jean-Claude Juncker of Luxembourg, who is head of the group of euro-zone finance ministers, is among politicians who have called for such bonds to be considered as a means of deterring speculators and protecting the euro.

Mr. Schäuble told Bild that younger people might not appreciate how much the European Union and the euro have contributed to peace since World War II.

“We must not squander the historic opportunity of a common Europe,” he said.

Germany Signals Support for Euro-Zone Members

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