25 September 2012

Merkel: Europe must take deep breath and enact reforms

Chancellor Angela Merkel said that Europe could only hope to come out of its crisis stronger and compete in a globalised world if its members pressed ahead with painful reforms and moved to more responsible budget policies.

Speaking at a meeting of the Federation of German Industries (BDI), Merkel acknowledged that Germany was "not an island" that could disconnect from economic developments in Europe and the world economy. But she placed the onus on Berlin's struggling eurozone partners to fix their own economies, rejecting the idea that Germany should relax its own productivity drive in order to help its partners.

"We need to take a deep breath to overcome this crisis", Merkel said. "We must make the efforts that will allow Europe to come out of this crisis stronger than it went in." "There is a lack of confidence on financial markets that some eurozone states can pay back their debts in the long term", she continued. "The world wonders how competitive eurozone countries are."

The German economy has held up well during the crisis, with unemployment holding near post-reunification lows. But there are signs that economic weakness across much of Europe and a slowdown in Chinese growth are beginning to bite.

She dismissed the notion that Berlin was slamming on the brakes in the creation of a European banking watchdog. In recent weeks, the German government has made clear that it sees a January deadline for putting this in place as unrealistic.

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© Reuters