Angela Merkel stands firm on eurozone debt crisis

 

German Chancellor Angela Merkel insisted today that Europe's debt crisis can only be solved by keeping a tight rein on government finances and introducing structural reforms.

She acknowledged that the crisis will dominate this weekend's summit of the world's 20 most important economies in the Mexican resort of Los Cabos.

But she told the German parliament: "We must all resist the temptation to finance growth again through new debt.

"We can only overcome the crisis when we tackle it at its roots, the high debt level and the lack of competitiveness in some member states."

Europe's debt woes "will overshadow all other topics" at the meeting, with the eyes of the world's leaders on Germany as Europe's biggest economy to fix the crisis and to do more to spur growth, she said.

"But strengthening growth and budget consolidation must go together," she added.

Mrs Merkel is widely viewed as the European leader most prominently championing fiscal discipline and austerity measures, in particular for the southern European nations that are the hardest hit by the crisis, such as Greece, Portugal or Spain.

But Germany's stance is coming increasingly under fire, with the political tide in Europe shifting toward seeking ways of fostering growth as the bloc is on the brink of a recession.

She stressed that those nations who have brought themselves into a situation where they needed to be bailed out by breaking the currency zone's rules limiting debt must work hard to restore trust and their public finances. "It is our duty to break the vicious circle of new debt and rules that are breached, again and again," she said.

She added: "All those who expect Germany to deliver a solution in a single drumbeat, who want to convince Germany of eurobonds, stability mechanisms, European deposit guarantees, yet more billions and many other things, to all those I say: Yes, Germany is strong. Germany is Europe's economic engine and stability anchor.

"But we also know that Germanys strength is not infinite, Germany's forces aren't unlimited either," she cautioned.

Europe can only be stabilised if its biggest economy does not overestimate its powers, but leads the bloc "step for step toward a political union," she said. "Europe is our destiny and our future."

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