Euro zone countries have agreed a rescue plan to prevent members of the currency bloc going bankrupt and will probably use it, with Ireland and Greece the top candidates for aid, a senior German lawmaker said.
"There is a plan," said Otto Bernhardt, a member of Chancellor Angela Merkel's Christian Democrats (CDU) who chairs the party's financial policy group in parliament.
"The finance ministers have agreed the procedures. The core point is: 'We won't let anyone go bust,'" he told Reuters.
Of all the euro zone states, Bernhardt said Ireland was the in the "worst situation of all", followed by Greece. He made clear that any aid would come at a price.
"We would look very closely at past sins," Bernhardt said. "We will not tolerate there being low-tax countries like Ireland for example. We will insist on a minimum corporate taxation rate."
The euro fell from just above $1.37 to around $1.368 after Reuters reported Bernhardt's comments.
Countries such as Ireland and Greece have been hit hard by a sharp economic downturn and are now being forced to pay hefty premiums over stronger bloc members to finance their debt, aggravating their financial troubles.
Speculation has grown in recent weeks that stronger members of the 16-nation euro zone, like Germany, could step in to help ailing partners.
On March 3 European Monetary Affairs Commissioner Joaquin Almunia said the euro zone had a way of bailing out its members, if they faced a crisis, before they had to seek help from the International Monetary Fund. However, he refused to give details, saying "it is not clever to talk in public about this solution".
European Union leaders met in Brussels on Friday to agree their stance for a Group of 20 summit on the global financial crisis in London on April 2.
Asked what the likelihood was that the plan would be used to rescue a fellow member of the currency area, Bernhardt said: "It depends on how the international crisis develops. It could be that they (Ireland) can manage without getting credit."
"But the chances we will need to help are greater than the chances that we will not need to help," he added.
A reserve fund is on standby at the European Central Bank, ready to be tapped at a moment's notice should it be needed, he said. "We have already built up a fund at the ECB," Bernhardt added, saying of any state that needed help: "They would receive loans."
"We are in a position to act within 24 hours. The ECB would take immediate action," he said. "The ECB can make an unlimited amount of money available."
The ECB said it had no comment on Bernhardt's remarks.
Bernhardt said the danger for Germany of not helping would outweigh the cost of helping: "What is the alternative? We would otherwise lose our currency."
