Merkel Defends Stance on Tightening Budgets of Euro Bloc Nations

German Chancellor Angela Merkel defended her government’s focus on tightening budgets in Europe, saying that the benefits of reining in spending outweigh the controversy of austerity.

Merkel, after meeting Estonian Prime Minister Andrus Ansip in Berlin today, lauded his country’s debt load of 10 percent of gross domestic product.

“We always talk about austerity -- that’s the new word that’s often used -- but forget that we never talk about the fact that we have to pay back debt” and instead spend more than we take in, Merkel said after being asked to respond to Estonians weary of deficit cuts and eager to boost spending.

“It’s become a matter of course that you can do that, though in the long term it won’t go well, at least I can say that for Germany,” Merkel said.

Merkel stood by Germany’s preference for consolidating budgets in the face of recession and record unemployment in the 17-member euro area. Yesterday, the chancellor said that austerity will require sacrifices in the near term, though the measures will give way to growth.

Standing alongside Ansip, Merkel said that Europe must look to his euro-member Baltic nation “in admiration.” Estonia, which raised its 2014 growth forecast this month to 3.6 percent, implemented budget cuts equal to about 10 percent of GDP to join the euro two years ago even as output plunged by a fifth in the wake of the 2008 collapse.

Merkel struck a similar chord yesterday, telling a conference in Berlin that taking on debt spending “is often made into a type of obligation” to serve growth.

“All of that is false,” the chancellor said yesterday. “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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.