Merkel Sees Long Road to End Euro Job Crisis as Leaders Meet

German Chancellor Angela Merkel urged European countries to boost youth employment without depending on aid money after she met fellow leaders for talks on easing the impact of German-led austerity on the euro area.

“We consciously didn’t talk about the money at our disposal, but about the measures we can carry out so more young people have employment opportunities,” Merkel told reporters in Berlin after hosting leaders including French President Francois Hollande, Italian Prime Minister Enrico Letta and Portugal’s Pedro Passos Coelho. “We have to say clearly that this problem can’t be solved from one day to the next.”

Facing a surge in Portuguese borrowing costs and pressure from euro-area countries to ease record joblessness, Merkel cited 8 billion euros ($10.4 billion) in aid from the European Union’s 2014-2020 budget. The European Investment Bank is offering 18 billion euros in loans for 2013 to 2015, German Labor Minister Ursula von der Leyen said.

Merkel, who is seeking a third term in German elections on Sept. 22, is blamed across southern Europe for record-high youth unemployment as a result of budget cuts and economic overhauls agreed to by countries such as Greece and Portugal in return for sovereign rescues in the euro-area debt crisis.

Her goal is to “show that Germany isn’t a cold-hearted hegemon that demands austerity and doesn’t care about the jobless,” Jan Techau, head of the Brussels office of the Carnegie Endowment, said by phone. “Youth unemployment can’t be fought by state-created jobs programs. It will be fought by economic dynamism and revamping European economies, which isn’t really happening in many euro nations.”

Unemployment Rises

Unemployment among people younger than 25 in the euro area rose to 23.9 percent in May, compared with 23 percent a year earlier, amid an 18-month recession that is the region’s longest, according to European Union data released yesterday. Germany had the lowest rate, 7.6 percent, while Greece had the highest, 59.2 percent, follow by Spain at 56.5 percent and Portugal with 42.1 percent.

Differences in tone between Europe’s northern and southern tiers flared at the news conference at the chancellery in Berlin, the seat of the leader of Europe’s biggest economy.

Policy makers have a duty “to give hope to our young people,” Hollande said. “This is a national obligation and it is also a European obligation.”

Lithuanian President Dalia Grybauskaite countered that “we can’t make an illusion for some governments to have an excuse not to do anything at home, thinking that Europe will help.”

‘No Europe’

“There is no Europe,” she said. “There are only member states who are responsible for their own employment policies. So Europe can help, together with us, but not solve everything.”

Aid commitments cited after today’s meeting didn’t involve new funding. EU leaders agreed at a summit in June to speed up the payout of 6 billion euros in the EU’s 2014-2020 budget to combat youth unemployment and to add unused budget money to the program, an amount EU President Herman Van Rompuy estimated at a further 2 billion euros. At the same time, Merkel resisted pressure by southern Europeans such as Letta to extend project lending by the EIB.

The lender has earmarked 6 billion euros in credits annually for 2013 and the next two years, Christof Roche, a spokesman for the bank, said in a phone interview from Brussels. The first installment will be available in August, von der Leyen said.

Mobilize Money

“These are not new funds but rather come from money already in place,” Roche said. The aid, which will be used to fund jobs in small- and medium-sized companies and for skills training, may mobilize as much as 30 billion euros in additional monies from private and public third parties, he said.

Rising borrowing costs in Portugal and speculation that Greece may need a second debt writedown underscore the risk of a resurgence of the crisis that was damped by the European Central Bank’s offer of unlimited bond-buying last September.

Portugal’s bonds slumped, pushing 10-year yields above 8 percent for the first time since November after two Cabinet members, including Finance Minister Vitor Gaspar, quit. Spanish and Italian bonds dropped for a second day.

Merkel rejected speculation that Greece would need another writedown to keep its international bailout on track, Sueddeutsche Zeitung quoted her as saying in an interview. “I don’t see that” happening, she said, according to the German newspaper.

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