Merkel Says Austerity Requires Sacrifices for Growth

(Corrects translation of “victims” to “sacrifices” in headline, first and third paragraphs of story that first appeared yesterday.)

Chancellor Angela Merkel said that austerity in the euro area will require sacrifices as European leaders struggle to resolve the debt crisis, though the pain will be worth it to regain sustainable economic growth.

The German leader dismissed the notion that increasing debt is necessary to generate growth. She lauded European leaders for cutting budget deficits in half during the years of crisis, citing her championing of the bloc’s fiscal pact.

“We know that there will have to be sacrifices in many countries,” Merkel told a forestry conference today in Berlin. “But I believe that in the long term we’ll have to have a growth strategy without always having to pile on debt.”

The German-led strategy of scaling back deficits as a response to the three-year-old debt crisis has come under criticism from other parts of the world because of recession and record unemployment in the 17-nation euro bloc.

U.S. Treasury Secretary Jacob J. Lew last week prodded European finance chiefs to shift toward generating economic expansion. Europe’s troubles risk hampering a recovery in the U.S. and a global effort to jump-start growth through monetary measures.

Merkel has insisted that any recovery must be pursued through consolidating budgets to win back market confidence and provide a sustainable basis for future growth.

“I’m often surprised that as a matter of course it’s often said in many parts of the world -- even after the financial crisis of 2008, 2009 -- that the main thing is that we’re growing again, at whatever cost,” Merkel said today. “The piling up of debt is often made into a type of obligation to serve the principle of growth.”

“All of that is false,” she said. “It’s not sustainable in the long term.”

To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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