German will rescue euro zone: Ackermann : Report

WASHINGTON (MarketWatch) 

Germany will ultimately take whatever steps necessary to keep the euro zone intact, said Deutsche Bank’s former Chief Executive Officer Josef Ackermann on Monday

“If it comes to worst, before the euro zone collapses, everything will be done to bail the euro zone out,” Ackermann said in a late afternoon speech at the Atlantic Council
Later he said that he had “no doubt” that the German people would support a rescue operation for the euro zone

“Destruction is much more expensive than further construction. A demolition of the euro zone will create chaos in Europe and probably also in many parts of the world,” he said

Germany is moving cautiously because it simply fears that countries on the European periphery will stop reform measures if they see that Berlin is going to guarantee everything, Ackermann said
The U.S. is pressing the government of German Chancellor Angela Merkel to do more to strengthen the euro zone
“I am grateful the U.S. is pushing Europe to act faster,” Ackermann said
G-7 finance ministers and central bank governors will hold a conference call on Tuesday to discuss the European debt crisis
Canadian Finance Minister Jim Flaherty told reporters that the leaders are concerned about potential consequences of a crisis in the euro zone, particularly a banking crisis
Later in the day, a senior U.S. Treasury official urged European leaders to pick up the pace of action to stem the financial crisis
“Movement to strengthen the European banking system will be of particular importance in this time period,” said the official, who spoke under the condition that he not be identified
Ackermann said a Greek exit from the euro-zone would be “very difficult but manageable.”
The public sector, including the European Central Bank, would be hurt more than the private sector, he believes
The EFSF, the temporary European bailout fund has about 250 billion euros ($312.3 billion) available to lend, and this would be “sufficient for a few months” for recapitalizing Spanish banks and funding sovereigns, he said
Another 500 billion euros would be available in a relatively short time under the European Stability Mechanism and the International Monetary Fund could also lend to the region, he said
“So all in all, we have a trillion-plus available, which in my view is sufficient,” he said
If there is a bank run, the only option would be for government “to give a full guarantee as France and Germany and other countries did after Lehman’s collapse.”
A bank run is a risk that he does not see happening, he added
“There is no immediate concern about the collapse of the euro-system,” Ackermann remarked
In the short-term, Europe must speed up implementation of the ESM and also allow the fund to recapitalize banks directly
He also called for governments to be careful with setting higher capital standards
Higher capital standards just take away ammunition for banks to help the real economy, he said