Sarkozy firmly backs the euro at Davos

French President Nicolas Sarkozy has firmly backed the euro saying that France and her European partners are firmly behind the currency and has also dismissed concerns about the euro zone debt crisis.

Speaking today (Thursday January 28) at the World Economic Forum in Davos, he declared; ‘Whether it be Chancellor Merkel or myself, never, never will we turn our backs on the euro. We will never abandon the euro, we will never drop the euro. The euro spells Europe. The euro is Europe and Europe has spelled 60 years of peace on our continent, therefore we will never let the euro go or be destroyed.

‘For us, it’s not simply an economic issue, it has to do with our identity as Europeans. For those of you who want to bet against the euro, be careful how you invest. We are determined to ensure the strength of the euro. It is of such importance that we will be there whenever it needs to be defended. The consequences of it failing would be so cataclysmic that we could never entertain the idea,’ he added.

Several eurozone countries are mired in massive public debt, leading some observers to question whether the single currency bloc can hold together, but the French leader has made it clear that this is a political priority.

Financial executives have voiced cautious optimism that the euro zone crisis will be resolved as policymakers at the annual World Economic Forum in Davos focus on the bloc's debt woes.

A year on from the Greek fiscal crisis business leaders said in Davos that expectations are growing that the EU is readying effective action to help weaker members of the single currency area and restore confidence in the financial sector.

‘I think Europe did the only good choice, which is to get through this crisis, because if you don’t fix it here, you’re going to fix it there, which is in the banking system,’ said Jamie Dimon, chief executive of JP Morgan Chase.

He said it would be far too risky for any country in the euro zone to restructure its debt, citing the weakness of the financial sector and the risk of triggering unpredictable capital flight and a banking crisis.

'We're positive the euro will continue to exist as a currency and the euro zone countries will work out their problems overall,’ Dieter Wemmer, chief financial officer of insurer Zurich Financial told Reuters.

But many economists and market analysts say Greece’s debt burden is unsustainable and will have to be restructured or rescheduled sooner or later. Athens hotly denies any such intention but is pressing for more time to repay its €110 billion European Union and International Monetary Fund rescue package and a lower interest rate.

A senior European insurance executive said troubled countries such as Greece and Ireland had several options to reduce their debt burden without forcing private creditors to take a haircut. They could, for example, buy back their own bonds on the secondary market at a discount or stretch out debt repayments.

‘At some point in time you can prolong existing debt. You simply say; I am going to continue to pay interest but will not repay the principal until three years later than I had originally agreed,’’ the executive said.

Such solutions were far more likely than a restructuring involving write-downs for creditors, which is common in the United States under the Chapter XI bankruptcy law, but carries a permanent stigma in Europe. Greece’s public debt reached 145% of Gross Domestic Product last year and is expected to peak at 158% in 2013.