LONDON, May 19 (MNI) - German Chancellor Merkel's opening comment to the German parliament that the 'euro is in danger' countered any hope for a corrective rally in the single European currency, the rate dropping back to retest overnight Asian lows of $1.2143, having seen recovery highs of $1.2227 early into the European session.

BRUSSELS (MNI) - The European Commission Wednesday noted Germany's decision to temporarily suspend short-selling of some bonds but stressed the need for European countries to act in a coordinated manner.

Germany Tuesday said it was banning naked short-selling of certain euro-zone debt and credit default swaps as well as some financial stocks, because, it said, excessive price movements could endanger the stability of the financial system. The news put pressure on the euro during trading on Wednesday.

LONDON, May 19 (MNI) - Early sterling recovery was knocked as markets reacted to German Chancellor Merkel's comments that the 'euro is in danger', prompting market back into risk aversion mode after early corrections.

Cable held off overnight Asian lows of $1.4239 through European morning trade Wednesday but was seen struggling to break back above $1.4300 ahead of the New York open, having seen highs on the day early in Europe of $1.4371.

BERLIN (MNI) - German Chancellor Angela Merkel said Wednesday that the current crisis of the euro is the biggest challenge for Europe in decades and has to be met at any cost.

"To make it clear, the euro is in danger," Merkel warned in a government declaration in Parliament. "If we don't avert this danger, the consequences for Europe are incalculable, and the consequences beyond Europe also incalculable," she insisted.

SINGAPORE, May 19 (MNI) - The euro ran into fresh selling pressure and was gravitating back toward its four-year low against the dollar in late Asian trade Monday as risk aversion continued to pummel regional stock markets.

FRANKFURT (MNI) - One of the lessons of recent years is that too much debt, whether it be in the household, corporate or public sector comes back to haunt you, Riksbank Governor Stefan Ingves told the Financial Times in an interview published Wednesday.

The governor of Sweden's central bank also warned that in the future central banks may have to intervene more aggressively in the financial sector by extending the "punch bowl principle" into that area.

SINGAPORE, May 19 (MNI) - The euro slumped to a new four-year low against the dollar Wednesday morning in Asia but managed to regain some of the lost ground as short-covering then ensued while risk aversion drove regional stock markets lower.

By Vicki Schmelzer

NEW YORK, May 18 (MNI) - A German ban on naked short selling of select eurozone instruments delivered a knock-out punch to the euro Tuesday, with the pair falling to new four-year lows versus the dollar.

Starting at midnight, Germany's financial watchdog BaFin will forbid naked short-selling of eurozone government bonds, shares of the 10 leading German financial institutions, as well as the credit default swaps (CDS) of eurozone government bonds, according to a BaFin report released late Tuesday.