Chancellor Angela Merkel’s government has fallen short on leadership in the euro area by failing to clarify its “support and incentives” for countries such as Italy and Spain as they cut deficits, Zoellick told a panel today at the Munich Security Conference in the Bavarian capital.
“If Germany at the end of 2012 is only associated with austerity and the key countries can’t maintain the political support for the economic actions, then Germany could become the target of ire,” Zoellick said on a panel that included German Defense Minister Thomas de Maiziere and former Foreign Minister and opposition leader Frank-Walter Steinmeier.
Merkel’s government pushed through a fiscal compact finalized at this week’s European Union summit, which puts in place stricter budget rules to reduce debts. Zoellick said such policies are insufficient as long as no measures are taken to promote growth.
“There’s billions sitting in Brussels that could move more quickly,” Zoellick told panel members.
Maiziere, who served as Merkel’s chief of staff from 2005 to 2009, took issue with the notion of diverting large sums for economic stimulus, also citing International Monetary Fund Managing Director Christine Lagarde. Lagarde last week called on European leaders to step up bailout funding for ailing states.
“I don’t think that you can achieve growth with just more money -- increased competitiveness comes through other means,” Maiziere said. “Growth and competitiveness will have to come about, but in a more intelligent way than would put us again in a position that we’re in now.”
Zoellick also said Germany’s reluctance to increase financing to fight the debt crisis has deterred governments in other parts of the world from lending a hand. He cited an unidentified Chinese leader at the November Group of 20 summit in Cannes, France, as expressing frustration at Germany.
“What I saw from the emerging markets was first some confusion, then some frustration, and then some disdain,” Zoellick said. “One of the Chinese vice premiers said to some of us on the side, ‘why should I act if Germany isn’t worried enough to act?’”
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