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Merkel Rebuffs Rajoy’s Call to Do More to Boost Euro Stimulus

Jan. 26 (Bloomberg) -- German Chancellor Angela Merkel rebuffed calls by Spanish Prime Minister Mariano Rajoy that euro nations in better financial health should help the bloc out of its economic slump by spurring growth.

Merkel, in the Chilean capital Santiago today for a meeting of European and Latin American leaders, said euro member states need to focus on both fiscal consolidation and growth. Rajoy said yesterday countries that have the funds should use them.

“There is no either/or,” Merkel said today after meeting with Chilean President Sebastian Pinera. “Confidence can only increase if you have solid finances on the one hand, and on the other hand have the structures of reform in such a way that the economy can grow. We are trying to make a contribution.”

European leaders declaring an end to the worst of their three-year-old debt crisis are still grappling with recession and soaring unemployment. Joblessness in Spain climbed to a record of more than 26 percent in the last quarter, putting almost 6 million people out of work, as Rajoy imposed the deepest budget cuts in the country’s democratic history.

The German leader was unmoved by calls for wealthier countries such as hers to loosen tight spending, saying that the 17-member currency union must focus on boosting competitiveness with respect to the rest of the world. Germany is leading the way in implementing that agenda, Merkel said.

“We in Germany believe we’re contributing to a robust euro area,” the chancellor said in Santiago’s presidential palace after signing an agreement on mining and economic growth with Chilean leader Pinera.

U.K. Referendum

Merkel and Rajoy are among 43 state leaders in the Andean capital for a summit of the EU and the Community of Latin American and Caribbean States. Brazilian President Dilma Rousseff and Cuban leader Raul Castro are attending.

Asked about U.K. Prime Minister David Cameron’s absence, Merkel reiterated that she’ll engage with the British leader after he called for a referendum on U.K. membership.

“I met David Cameron two days ago in Davos and he told me he is working to push Great Britain in the direction of remaining part of the European Union,” Merkel said. “He also indicated that we need to change things. We’ll have to discuss these things with Great Britain. In the end, in Europe we will always have to come to a compromise. We work well together.”

Merkel also said that the Group of 20 wealthiest global economies aren’t “where we need to be” in imposing financial regulation, citing the proliferation of tax fraud and evasion.

The global economy has “too much tax fraud, evasion -- competition, low tax areas where we have to do much more,” the German leader said.

To contact the reporter on this story: Patrick Donahue in Santiago at

To contact the editor responsible for this story: James Hertling at

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