German Chancellor Angela Merkel said a Greek exit from the euro area would have an “incalculable” impact as she restated her determination to keep the currency union whole.
“Greece, from everything I know, won’t decide to leave the euro,” Merkel said during a town-hall-style event with students in Berlin today. “I don’t want Greece to leave the euro and therefore the question doesn’t arise. It doesn’t require a political response because it’s not something that’s on our minds.”
To counter the debt crisis, Greece must overhaul its economy because “there is no way around the reforms and changes,” she said. Greece’s situation is “very complicated” and its political leaders haven’t provided “the necessary transparency yet.”
Merkel’s dual message of support and budgetary rigor comes as Prime Minister Lucas Papademos haggles with the heads of Greek political parties and international officials over the terms for a second rescue package, seeking to avert a collapse of the euro area’s most-indebted economy. At stake is whether Greece wins the bailout, secures a debt write-off with private creditors and remains in the euro region.
“I won’t take part in any effort to push Greece out of the euro,” Merkel said. “It would have incalculable consequences.”
Renewing a message she has conveyed for most of the crisis, she said the turmoil that began in Greece in 2009 can’t be solved “overnight.” Policy makers must tackle the root causes of excessive debt and lagging competitiveness among the 17 euro nations, she said in a speech before the debate.
Merkel renewed her rejection of joint euro-area bonds, saying they would paper gaps in competitiveness. While financial markets might welcome joint debt, it would threaten prosperity, she said.
“My belief is that we have to take our cue from the best in Europe,” she said. “Mediocrity isn’t enough” to compete in the global economy