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Merkel: eurozone needs growth as well as cuts

The Local · 25 Apr 2012, 16:55

Published: 25 Apr 2012 16:55 GMT+02:00

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"In Europe, we are called to overcome the sovereign debt crisis and the consequences of the international financial and economic crisis," Merkel told a conference on raw materials in Berlin.

"On one hand, that can be done with a sustainable fiscal policy ... but that is a necessary but not sufficient method of overcoming the crisis because we also need growth," added the chancellor.

"We need growth in the form of sustainable initiatives, not stimulus programmes which would increase debt, but growth in the form of structural reforms, as European Central Bank President Mario Draghi said today," she added.

In regular testimony earlier Wednesday at the European Parliament in Brussels, Draghi said Europe needed a "growth compact" in addition to its "fiscal compact" on greater budgetary discipline.

The structural reforms required for governments to make their economies competitive once again would necessarily entail some degree of pain, the ECB chief said.

The comments came as a growing number of eurozone countries are beginning to baulk at drastic belt-tightening measures being prescribed by governments in a bid to rein in their deficits as part of a recently agreed "fiscal compact."

In France, the leading presidential candidate Francois Hollande has called for a re-negotiation of the fiscal compact to include growth measures.

Germany will dodge recession in 2012 despite the eurozone debt crisis and should double its growth rate next year, the government said Wednesday, unveiling new forecasts for Europe's top economy.

Europe's powerhouse will grow by 0.7 percent in 2012 and by 1.6 percent next year, Economy Minister Philipp Rösler told reporters, sticking to Berlin's previous forecast made in January.

"Growth of 0.7 percent, higher income and more people in employment show that Germany is doing well ... Germany is and remains the growth motor in Europe," Rösler said.

Unemployment is expected to drop to 6.7 percent this year and to a new record low of 6.5 percent in 2013, the government said.

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Germany has defied the eurozone debt crisis and generally performed better than its trading partners in Europe.

Data published earlier on Wednesday showed that Britain's economy unexpectedly sank back into recession in the first quarter of the year, contracting by 0.2 percent.


The Local (news@thelocal.de)

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Your comments about this article

18:47 April 25, 2012 by smart2012
Growing 0,7%???? but if last year u (merkel) said growth of 1.3% in 2013, and last month u said 0,9% in 2012??? And in April it was the biggest production loss as of 2009 ie right after 2008 crisis. Germans, wake up.. All what merkel is doing is ruining Germany and eu
11:21 April 27, 2012 by AlexR
Nice change of position -again. For the last three years, the narrative of Merkel & Co was "make the cuts first and growth will follow". Now that this obviously backfires, it is changed to "we need growth as well as cuts".

In the very near future, it will change again to "cuts destroy growth", in accordance to what every prominent economist have been saying all along and the economic reality in the PIIGS (and soon the rest of the eurozone) countries.
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