UPDATE 1-Euro in difficult on all sides but will survive-Merkel

Wed Feb 24, 2010 2:41pm EST

(Adds quotes, detail)

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BERLIN, Feb 24 (Reuters) - The euro is in a difficultposition for the first time but will weather the storm, GermanChancellor Angela Merkel said in a newspaper interview publishedon Wednesday.

It was dangerous that some countries were being speculatedagainst, she said, adding that debt-ridden euro zone memberssuch as Greece had to tackle their own problems.

"For the first time since it was introduced, the euro is nowin a difficult situation but it will stand its ground," Merkeltold the Frankfurter Allgemeine Zeitung in an interview.

"I think real confidence in the euro can only be achieved onthe financial markets if the problem is attacked at the roots inGreece and other states with very high deficits," she said.

Greece"s debt crisis has shaken the euro and sent peripheralbond and credit default swaps markets reeling.

European leaders have offered verbal support to Greece butagreed no concrete steps. Germany, Europe"s biggest economy andtraditionally a rock of stability in the euro zone, is a crucialplayer.

Merkel has been reluctant to offer aid to Athens, well awarethat public opinion and her Free Democrat (FDP) coalitionpartners are hostile to anything that would look as if Germantaxpayers were bailing out Greece.

In the interview, Merkel welcomed moves by Athens toconsolidate its public finances and said it was important thatGreece achieve its goals.

She said the basis for national economic policy was theEuropean Union"s Stability and Growth Pact as there was nopolitical union underpinning the euro.

"In this pact, we have a sustainable instrument thatguarantees a coordination of budget policy for the stability ofthe euro," said Merkel, adding that Germany would vigorouslypursue the goal of having a stable euro.

"It would be wrong to have a coordinated economic policy forthe euro group while the others can do what they want, becausewe are of course closely linked to our other neighbours throughtrade," she said. (Reporting by Madeline Chambers; editing by David Stamp)

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