Merkel: still no quick fix to euro crisis

AP News
Posted: Nov 17, 2011 7:32 AM
Merkel: still no quick fix to euro crisis

German Chancellor Angela Merkel is brushing aside pressure for a quick-fix solution to the euro crisis even as market tensions mount, arguing that spreading debt liability could ruin Europe's competitiveness and a massive European Central Bank bond-buying drive wouldn't resolve its problems.

Merkel also argued in a speech Thursday to an economic conference that Europe needs to consider growth-promoting measures that don't immediately cost money, such as labor-market reforms _ and that such measures will require patience.

Merkel noted that Europe has been discussing "one quick solution after another" _ such as the introduction of jointly backed so-called "eurobonds," which she adamantly opposes but backers say would fix concern over the solvency of weaker eurozone countries.

She insisted Europe must instead address the continent's problems at the root, and pushed her drive for reform to the European Union treaties to strengthen the currency union.

"We have the choice now: you can have a . . . collectivization of everything with everyone in Europe _ that will lead to a short-term calming of the markets, and to Europe's competitiveness declining massively," Merkel said.

She said she didn't want that because she grew up in communist East Germany and "saw the chance in 1990 to switch to more competitive surroundings _ which I've found good for 21 years now."

Germany, as Europe's biggest economy, has been instrumental in setting the tone for the 17-nation eurozone's rescue measures, insisting on painful reforms in exchange for aid to troubled nations.

This week, Volker Kauder, the parliamentary caucus leader of Merkel's conservative bloc, proclaimed that "now German is being spoken in Europe _ not in terms of the language, but in the acceptance of the instruments for which Angela Merkel has fought for so long and then successfully."

However, there is resistance to some German stances. Officials from countries including France and Ireland have argued that the ECB's unlimited firepower should ultimately be brought to bear to bring down the cost of borrowing for pressured nations, such as Italy.

But Germany is adamantly opposed _ arguing that it could stoke inflation or take the pressure off governments to get their budgets in order.

"I am firmly convinced that this (market) uncertainty can only be overcome by firm political solutions," Merkel said. "If politicians think the ECB can resolve the problem of the euro's weaknesses, then I think they are persuading themselves of something that won't happen."

Germany has insisted on austerity as a keystone of Europe's firefighting effort, and Merkel has spoken out recently against new stimulus programs.

On Thursday, she recalled the success of labor-market and welfare-state reforms introduced by Germany in the mid-2000s and insisted Europe must bear in mind that "not all growth measures cost money."

"You can have labor market reforms, internal market reforms; you can free up the services sector, you can unleash professional groups," she said.

"When people keep saying in Europe that this and that still hasn't worked, we have to remember that structural reforms, for instance on the labor market, will never take effect between two quarters," Merkel added.

"It always takes two to three years to see any effect, and I think we have to take care that we don't fall into a kind of breathlessness."