German chancellor Angela Merkel said today that Europe's heavily indebted nations must push ahead with structural reforms to get their economies back on track and must not rely on government spending to foster growth.
Labour market and other reforms do not heal economies overnight but are the right way toward sustainable growth, Merkel said. "It would be absolutely wrong" not to pursue the path of reforms, she said.
Merkel, the leader of Europe's biggest economy, has long advocated a mix of austerity measures and structural reforms, especially for struggling southern European nations like Greece, as well as Ireland, which had to be bailed out by its European peers.
Over the past weeks, as the continent has teetered on the brink of a recession, she has increasingly come under fire from many of her European counterparts, who have rallied behind French President Francois Hollande's calls for a regional growth strategy.
Germany has shown solidarity with its European partners, Merkel told a gathering of her conservative Christian Democratic Union's business group in Berlin, but "we must learn from the mistakes of the past" and end governments' addiction to financing spending with borrowed money.
Countries that have received a bailout, such as Greece, cannot expect that the attached conditions be relaxed, even if those governments face a popular backlash, she said.
Europe will only be taken seriously if the governments live up to their commitments, she said.
Merkel explicitly welcomed Spain's recent application for up to €100 billion ($125 billion) in rescue loans from its European partners to shore up its ailing banks. She stressed that, in return, the government in Madrid must meet the conditions that will come with the assistance, although those would not be as far-reaching as those for Greece and Portugal, which needed much broader bailouts.
Merkel also reiterated her opposition to jointly guaranteed debt,
so-called eurobonds, as a short term fix to the continent's lingering
debt crisis. She said Germany wants a deeper European integration,
saying "it must always be ensured that joint liability and joint control
lie within one hand."
Merkel has said steps of a broader European integration such as eurobonds or a centralized institution overseeing and guaranteeing banks' deposits can only be the final steps of Europe's integration, not the beginning.