Merkel: Do not overestimate Germany

German Chancellor Angela Merkel said on Thursday that the eurozone crisis would dominate next week's G20 summit but warned leaders clamouring for her to take charge that she needed their help.

Merkel: Do not overestimate Germany
Photo: DPA

In a speech to German lawmakers ahead of the meeting of world leaders in Los Cabos, Mexico on June 18-19, Merkel said Europe could not take the easy way out with quick fixes smacking of “mediocrity” that failed to address core problems.

“All those looking to Germany again in these days in Los Cabos, who are expecting a drum roll and the answer… I say to them Germany is strong, Germany is an engine of economic growth and a stability anchor in Europe,” Merkel said.

“But Germany’s powers are not unlimited,” she added, cautioning against counting too much on Germany as the sole crisis fighter in Europe.

“All the aid packages will ring hollow if you overestimate Germany’s strength,” she said, describing the tasks ahead for Europe as “Herculean”.

Merkel acknowledged that Germany found itself centre stage as leaders grapple with the incalculable impact of the raging eurozone turmoil on the global economy.

“Our country will be the centre of attention – it’s a fact, all eyes are on Germany because we are the biggest European economy and a major exporter,” Merkel said.

But Europe would only find a way out of the crisis with a strong “political union” that mandated greater fiscal coordination and oversight to put member countries on a “solid and honest foundation”, she said.

“Germany is investing its strength and its power, not only for the benefit of the people in Germany but also in the interest of European integration and in the interest of the global economy,” she said to applause.

But she said all those calling for Germany to “pour billions into eurobonds, stability funds, European bank deposit guarantee funds” in a bid to calm the markets must focus first on fiscal discipline.

In reaction to the German leader’s comments, French Prime Minister Jean-Marc Ayrault on Thursday urged Merkel to avoid “simplistic talk”.

“The situation in Europe is sufficiently critical not to give in to simplistic talk. We need to deal with things seriously and courageously,” Ayrault said, warning that the “future of the eurozone is in danger.”

Paris and Berlin are at odds over what initiatives to take to stimulate growth in the eurozone and maintain budgetary discipline.

Merkel did express her support for “a bigger role” for the European Central Bank in overseeing banks to avert further storms in the sector that have posed one of the biggest recent threats to the eurozone.

Spain, the eurozone’s fourth largest economy, was forced last week to accept a 1€00 billion bailout but even that failed to impress the bond markets and the country’s borrowing costs have continued to mount.

Meanwhile Greeks return to the polls Sunday and may elect a government that rejects the terms of Athens’ bailout package, destroying the EU rescue plan.

Merkel said many of the countries crying out for German action, notably the United States, needed to turn their backs on deficit-spending and start implementing the kind of structural reforms Berlin has put in place.

“Financing growth with new borrowing must stop,” she said, calling for joint G20 action on budget consolidation.

Merkel added that China needed to take action on the flexibility of its currency, amid widespread accusations the yuan is undervalued and contributing to major trade imbalances, primarily with the United States.

Germany has come under intense pressure, notably from US President Barack Obama, to do more to put an end to the eurozone crisis as it is seen as a threat to the fragile US recovery and the global economy as a whole.

However, Berlin has resisted calls for new European stimulus programmes to promote economic growth, saying that fiscal discipline is the only way to restore market confidence in the eurozone.

Merkel drew unexpected support from US Treasury Secretary Timothy Geithner, who Wednesday endorsed Germany’s call for structural reforms to save the eurozone.

“What Germany is saying is to make monetary union work, they are prepared to put a substantial commitment of resources behind this broader endeavour,” Geithner said.

“But for that to work, it needs to be in support of reforms and changes in the institution … and that is a very reasonable position.”

Merkel received more good news closer to home when her coalition struck a deal with the opposition on the date of June 29 for parliament to vote on ratifying the new EU fiscal treaty that she has championed.

Although they have not agreed on all the fine print, the accord was seen as an auspicious sign it would pass with the necessary two-thirds majority.


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Ex-chancellor Schröder sues German Bundestag for removing perks

Former Chancellor Gerhard Schröder has sued the German parliament for removing some of his official post-retirement perks over his links to Russian energy giants, his lawyer said Friday.

Ex-chancellor Schröder sues German Bundestag for removing perks

Schröder, 78, has come under heavy criticism for his proximity to Russian President Vladimir Putin and involvement with state-backed energy companies.

The decision to suspend Schröder’s taxpayer-funded office and staff in May was “contrary to the rule of law”, Michael Nagel, told public broadcaster NDR.

Schröder “heard of everything through the media”, Nagel said, noting that the Social Democrat had asked for a hearing before the budget committee responsible but was not given the chance to express himself.

READ ALSO: Germany strips Schröder of official perks over Russia ties

Schröder’s lawyers filed the complaint with an administrative Berlin court, a spokesman for the court confirmed.

In its decision to strip him of the perks, the committee concluded that Schröder, who served as chancellor from 1998 to 2005, “no longer upholds the continuing obligations of his office”.

Most of Schröder’s office staff had already quit before the final ruling was made.

Despite resigning from the board of Russian oil company Rosneft and turning down a post on the supervisory board of gas giant Gazprom in May, Schröder has maintained close ties with the Kremlin.

The former chancellor met Putin in July, after which he said Moscow was ready for a “negotiated solution” to the war in Ukraine — comments branded as “disgusting” by Ukrainian President Volodymyr Zelensky.

Last week, the Social Democrats concluded that Schröder would be allowed to remain a member after he was found not have breached party rules over his ties to the Russian President.

Schröder’s stance on the war and solo diplomacy has made him an embarrassment to the SPD, which is also the party of current Chancellor Olaf Scholz.