New anchor for euro stability vital -Germany's Merkel

By Andreas Rinke and Thorsten Severin

KARLSRUHE, Germany, Nov 15 (Reuters) - Europe must see off risks to the euro and establish a new anchor for financial and economic stability in the euro zone, Chancellor Angela Merkel told a German conservative party congress on Monday.

Merkel, speaking to a rally of her Christian Democratic Union (CDU) in the southwestern town of Karlsruhe, said it was essential that the European Union work together to prevent any further crises of confidence like that in Greece.

She was speaking as pressure grew on Ireland to agree on an EU bailout to halt a debt market sell-off and its spread to other European government borrowers.

"Everything is at stake -- if the euro fails, then Europe will fail," Merkel told delegates at the CDU congress.

"The idea of European values and unity will have failed, an idea that gave our continent strength and prosperity after the last century with its wars and destruction. It's up to us. It's our task to create a new anchor for a culture of stability in Europe," said the chancellor.

Merkel, trying to boost her party's slumping fortunes, did not go into detail about plans for a new euro stability pact nor did she mention Ireland in particular. [ID:nLDE68T0MG]

Berlin's push for states to agree on a mechanism that would allow Europe to deal with future debt crises and potentially have the private sector share the cost of a debt restructuring have added to worries for European bond investors.

"We've got to prepare for the future so that a crisis won't ever happen again," she said in her 75-minute address.

Greek Prime Minister George Papandreou said Germany's tough stance on banks and bond markets sharing the pain of any default could force some economies toward bankruptcy and had pushed up interest rates for Ireland and Portugal.

"This could create a self-fulfilling prophecy ... This could break backs. This could force economies towards bankruptcy," said Papandreou during a visit to Paris. [ID:nPISFME6FP]

Merkel attacked her predecessor, Social Democrat Chancellor Gerhard Schroeder and his Finance Minister Hans Eichel, for allowing Greece into the euro zone. The SPD, now in opposition, acted irresponsibly, she said.

"In 2000 Schroeder and Eichel couldn't let Greece join the euro fast enough and they ignored all the warnings," Merkel said. "It was a political decision ... political decisions are important but those which ignore the facts are irresponsible."

She also said Germany, one of the world's leading export nations, would not accept being punished for its successes.

Merkel was referring to pressure from the United States for Germany to reduce its trade and current account surplus and stimulate domestic demand to help global economic recovery.

"We will not allow ourselves to be punished for something that we do well," Merkel said. "We'll not allow ourselves to be whipped because we export good products, made in Germany, all around the world."