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Merkel stresses need for austerity in Europe

Published May 10, 2012 1:11 pm

Crisis • Borrowing levels need to come down to let Europe recover, she says.
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Berlin • German Chancellor Angela Merkel gave little ground to those hoping she would temper her demands for austerity, telling the country's Parliament Thursday that the only way Europe can recover from its debt crisis is if it perseveres with structural reforms alongside tough measures to bring borrowing levels down.

Merkel dismissed calls to abandon or scale back austerity measures, which involve lower government spending and higher taxes, within the European Union. She insisted that the combination of debt reduction and growth were the "two pillars" of the strategy needed to bring the trade bloc out of the crisis.

"Growth through structural reform is sensible, important and necessary," she told Parliament. "Growth through debt would throw us back to the beginning of the crisis, and that's why we haven't done it and won't do it."

Debate over the future of European austerity measures has flared up in recent days following elections in France and Greece.

Socialist candidate Francois Hollande won France's presidential elections on Sunday after campaigning for a greater emphasis on growth in Europe's crisis management. Meanwhile, most people voted for anti-austerity parties in Sunday elections in Greece, stoking fears that the country would not meet the commitments it has made in return for bailout money.

Merkel said reducing debt and strengthening competitiveness needed to go hand in hand.

"They aren't contradictory, they belong together," she said.

Merkel has repeatedly cautioned against departing from the course of austerity, frustrating some European leaders whose voters have taken to the streets and the ballot boxes to oppose government spending cuts.

"There is no golden path or supposed miracle cure," said Merkel, dismissing once again suggestions that Germany might back so-called euro bonds issued jointly by the 17 nations that share the common currency. Hollande, the French president-elect, has called for such bonds to finance infrastructure projects and thereby stimulate the European economy.

She also urged patience, saying that "overcoming the crisis is a long, arduous process that will only succeed if we start at the root of the crisis, and that's the horrendous indebtedness and lack of competitiveness of some euro countries."

Merkel, who will be taking part in the G-8 meeting at Camp David May 18-19, also took a gentle jab at rich countries outside Europe, such as the United States, by insisting that reining in government spending was the only way to achieve sustainable growth.

"That's not just the case for Europe, that's true for nearly all industrialized countries," she said.