Germany's Merkel: Europe's strugglers must reform

German Chancellor Angela Merkel has stuck to her agenda of reform for Europe's debt-troubled countries, warning that her country doesn't have an infinite ability to help.

Speaking in an interview with six European newspapers published Wednesday, Merkel also dismissed increasing pressure for the 17 countries that use the euro to beef up their financial firewall, clashing with comments made by International Monetary Fund head Christine Lagarde, who called this week for an increase in the eurozone's €500 billion ($650 billion) permanent rescue fund. Germany currently sees no need for the increase and notes that a review of that figure already is planned in March.

“It makes no sense if we keep promising more money but don't combat the causes of the crisis,” Merkel said in the interview.

In Spain, she noted, youth unemployment is sky-high “and that is also because of the legislation” — something the country's new government aims to tackle.

“Amid all the billions in aid and rescue funds, we Germans also must watch that we do not lose our strength in the end — because our possibilities are not endless either, and that would not help Europe as a whole,” Merkel added.

“We show solidarity, but must not forget (countries') own initiative,” she said. German daily Sueddeutsche Zeitung published the interview along with Britain's The Guardian, El Pais of Spain, France's Le Monde, Italy's La Stampa and Gazeta Wyborcza of Poland.

Germany, Europe's biggest economy, has put its stamp on the eurozone rescue effort and insisted on austerity as a key plank. Still, Merkel has put a greater emphasis lately on the need for growth — although she continues to resist stimulus packages, arguing that it makes no sense to combat a debt crisis by running up new debt.

Instead, in Wednesday's interview, released hours before her opening speech to the World Economic Forum in Davos, Switzerland, Merkel underlined her willingness to help spur growth by using money from existing European Union funds more efficiently.

“We should comb through European funds in which unclaimed money lies — I would like us to use it in a targeted way for measures that encourage growth and employment,” she said.

She named as examples support for small firms or people founding companies, funding for research or job programs for young people.

Merkel stressed her continued resistance to calls for issuing jointly backed debt — so-called “eurobonds” — something that would likely push up Germany's very low current borrowing costs.

“For the current crisis, eurobonds are not a solution,” she said. “We can only consider collective liability when we have achieved much deeper integration in Europe — but not to tackle the crisis.”

She acknowledged that Europe still has work in front of it to win back markets' confidence — and that “there is also the special case of Greece where, despite all the efforts by the Greeks as well as the international community, we have not yet succeeded in stabilizing the situation.”


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