Merkel Says Europe’s Leaders Have ‘Quite a Stretch to Go’

Dec. 15 (Bloomberg) -- German Chancellor Angela Merkel said that while Europe’s leaders have made progress on stabilizing the euro, they must continue their fiscal integration.

“We’ve made quite a bit of progress: we have a solidarity mechanism with the ESM and we have more budget discipline through the fiscal pact,” Merkel said in an online video message today. “But we have quite a stretch to go.”

Europe’s leaders reached a deal this week on common banking supervision that paved the way for the European Stability Mechanism rescue fund to recapitalize lenders to help ease the debt crisis. Merkel called on Germans, who contribute the most to rescues of ailing states, to recognize that their fates are tied to other European countries.

“We’re all in it together in the euro area,” she said, according to an e-mailed summary of her remarks from the government. “That means European work is always domestic policy work.”

The chancellor, who is going into 2013 with an “optimistic but also prudent” attitude, said politicians must support demand at home as Germany’s export-dependent economy weakens.

“We can’t determine the international economic situation on our own, but we can do something, for example, to ensure domestic demand continues sensibly,” she said.

Germany’s extension of subsidies for companies to fund shorter employee hours and retain a skilled workforce is an example of how government can support the economy, she said.

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To contact the editor responsible for this story: Frank Connelly at