Merkel "Worried" By French Euro Debate

The German chancellor opposes increased political control of the European Central Bank, an idea promoted by both of France's top Presidential contenders

German leader Angela Merkel has strongly defended the independence of the European Central Bank (ECB), saying she is "worried" about the debate over the euro in France.

The German chancellor in a weekend interview with French daily Le Monde took a firm stance against the idea of increased political control of the ECB promoted recently by French politicians - including both top contenders for France's May presidential elections, Nicolas Sarkozy and Segolene Royal.

French political circles view the ECB's priority of countering inflation - resulting in high interest rates and a high exchange rate of the euro towards the dollar - as hampering growth and exports, and are seeking more political power to steer the Frankfurt-based bank.

But Ms Merkel, whose country currently holds the EU presidency, said "frankly, this debate in France rather worries me. The existence of the euro is linked to a common decision which we took: to have an independent Central Bank."

The 1992 deal on the establishment of European Monetary Union (EMU) was at the time only accepted by Germany on condition that the ECB had full independence from political interference, in a bid to continue the post-war monetary stability which had been brought about by west-Germany's strong D-Mark.

"The abandoning of the Franc and the Mark was a considerable step. If we want to preserve confidence in the euro, we must leave it outside political debate, leave the European Central Bank its independence. That is the very firm German position," Ms Merkel stated.

She told European politicians to stop blaming the euro for economic difficulties at home and instead step up reforms, also referring to criticism of the euro by Italian politicians during elections the country had last year.

Ms Merkel said "We have to be careful that our difficulties ... are not unfairly blamed on the euro. It is a very tough currency for it shows up in a very clear-cut way where a country is competitive and where it might have problems," with Italy and France currently seen as two of the EU's biggest laggards on competitiveness.

The chancellor indicated that the recent boom in her own country had not occurred "because we have been especially lucky with the euro" but because Berlin had pushed through "very difficult reforms" making labour markets more flexible and curbing salary increases.

"For the first time, we are rewarded for these efforts. I don't want to give any advice to any other country but I think that altogether, when facing globalisation, one cannot escape this path," Ms Merkel said.

But Italian prime minister Romano Prodi on Friday (12 January) appeared to continue to blame Italy's problems on the euro, saying it would be preferable for the ECB to stop raising interest rates, according to Reuters.

Economic think-tank the OECD earlier this week echoed Ms Merkel's remarks, saying in a report that "In the public debate, the union's poor performance in these two areas has often been blamed on the single currency itself. However, this criticism is misguided."

Like Ms Merkel, the think-tank told EU governments to embark on structural reforms at home instead.

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