– Sarkozy warns speculators not to attack euro
– Strengthening rescue fund seen key to restoring confidence
– JPMorgan: EU right to seek solution without restructuring
– Some see rescheduling of Greek debt, but no big haircuts (Adds Sarkozy, Trichet)
French President Nicolas Sarkozy passionately defended the euro against sceptics at the World Economic Forum on Thursday, saying he and German Chancellor Angela Merkel would never let the currency fall.
Sarkozy spoke as financial executives attending the Davos forum voiced cautious optimism that the euro zone's debt crisis could be resolved without contagion spreading to Spain or investors being forced to take unbearable losses.
"To those who would bet against the euro, watch out for your money because we are fully determined to defend the euro," Sarkozy said in a keynote speech. "Mrs Merkel and I will never — do you hear me, never — let the euro fall."
U.S. Treasury Secretary Timothy Geithner, European Union top monetary official Olli Rehn and leading bankers were due to attend private meetings and discussion panels at the Forum on Thursday which will discuss the euro zone and other topics.
A year after the Greek fiscal crisis dominated Davos, leading to bailouts for Greece in May and Ireland in December, business leaders say expectations are growing that the EU may be 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," JP Morgan Chase Chief Executive Jamie Dimon said.
He told a panel discussion 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.
European Central Bank chief Jean-Claude Trichet echoed Sarkozy's robust defence, telling another panel: "There is no crisis of the euro currency. That is absolutely clear."
European insurance executives said private bondholders might be asked to take losses on some southern euro zone countries' debt in the next few years but it would not cause severe problems for their business.
Trichet said there was no debt rescheduling or "haircut" in the programmes of the crisis-hit euro zone states.
"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.
"I think that there's the likelihood that in some areas some haircut will occur. Whether it will be dramatic — I don't think so," Wemmer said in an interview.
EU leaders are expected to adopt a comprehensive package of measures at a summit in late March involving reforms to its rescue fund, tougher fiscal discipline rules and commitments to structural economic reforms to improve competitiveness.
UNSUSTAINABLE?
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 euro EU/IMF rescue package and a lower interest rate.
Underlining the global struggle with debt, ratings agency Standard & Poor's cut Japan's long-term sovereign credit ratings to 'AA-' from 'AA' on Thursday, saying it expects the country's fiscal deficits to remain high in the next few years.
Domenico Siniscalco, CEO of Morgan Stanley Europe and a former Italian finance minister, told Reuters Insider television that policymakers and bankers were working hard to find a solution to the euro zone "and I believe we are going to make it".
He said the euro zone rescue fund established to help states in difficult was "the embryo of a European treasury" and the huge demand on Monday for its first issue of bail-out bonds for lending on to Ireland showed it had market confidence.
Dimon said Germany was right to oppose any mutualisation of euro zone countries' debt, but the chief executive of German retailer Metro, Eckhard Cordes, said that even though the idea of common euro zone bonds was not popular in Germany, it was the only alternative to "some countries going belly-up".
Martin Sorrell, CEO of WPP, the world's biggest advertising company, said he was struck by the increased faith among economists and executives in the euro zone's ability to overcome its problems.
"One thing about Davos is there seems to be a bit of restrained optimism," he told Reuters Insider, noting that even sceptics such as U.S. economist Nouriel Roubini — nicknamed Dr. Doom for predicting the credit crisis — were more upbeat on the euro zone.
