Her words sparked a sharp sell off in the euro. It traded at $1.34, down from $1.3624 on Monday. Analyst Ian Stannard with BNP Paribas in London said: "This is likely to be the start of a bigger move lower for the euro."
Merkel pointed out the difference between the Greek and Irish crises. The Greek disaster was caused by over spending, while the Irish situation is more serious, with Irish banks in deep trouble. Merkel underlined the need for Eurozone countries to adhere to the Growth and Stability Pact. She said: "If the euro is to be a stable currency, the Stability and Growth Pact needs to be kept."
Ireland is the second country to fall after Greece. Portugal and Spain could be next. While Merkel's words are on target, there is no way to correct the imbalances in member countries in the immediate future. So Stannard's remarks may prove correct., namely that the euro trades lower.