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Germany not looking at smaller euro zone

Merkel says priority is to stabilise euro zone "in its current form"
Merkel says priority is to stabilise euro zone "in its current form"

German Chancellor Angela Merkel has said stabilising the euro zone in its current form is the top priority for her government. She was speaking to reporters at a news conference with Romania's president in Berlin.

Earlier Reuters reported that some French and German officials were thinking about proceeding with closer integration, even if that meant doing so with a smaller group of core euro zone countries.

Merkel also said that Italy needed to win back confidence and urged rapid clarity on the future leadership of the country.

Tánaiste Eamon Gilmore said that Ireland would remain in the euro zone, even if France and Germany went ahead with their own plans.

He said both he and the Irish Government very much agreed with Commission President Barroso, who had made it very clear that individual countries should not be going off on what he called solo runs.

He said whether it was Germany or France or any other country in the euro zone or the EU, they needed to remember that there was an interdependence on each other.

Earlier, Merkel's spokesman Steffen Seibert said Germany was not pursuing the idea of a smaller euro zone and its policies were focused on stabilising the currency bloc as a whole.

Reuters reports said that German and French officials have discussed plans for a radical overhaul of the European Union that would involve setting up a more integrated and potentially smaller euro zone.

A source quoted by the news agency said that while any move needs to be made cautiously, Europe needs to make a list of those who do not want to be part of the club and those who cannot be part. The change has been discussed on an "intellectual" level but had not moved to operational or technical discussions, the source said.

The head of the International Monetary Fund today called for political clarity in efforts to tackle the debt crisis that has gripped Italy, saying uncertainty around who would succeed Prime Minister Silvio Berlusconi was fuelling market volatility.

Christine Lagarde was speaking during a visit to China, as Rome politicians were scrambling to find a replacement for Berlusconi, who has said he will step down when parliament approves reforms aimed at placating the markets.

"No one exactly understands who is going to come out as the leader. That confusion is particularly conducive to volatility," Lagarde told a news conference in Beijing.

"So from my perspective, political clarity is conducive to more stability and my objective from the fund's point of view is better and more stability," she added.

Lagarde also said she believed Chinese authorities were prepared to let the yuan appreciate further, as demanded by many US and other western politicians who accuse Beijing of holding its currency artificially low to give an unfair advantage to its exporters.