Merkel Holds Firm Amid Market Rout Urging Debt DisciplineArne Delfs
Chancellor Angela Merkel held the line against advocates of stimulus programs to spur Europe’s economy, saying existing aid has been under-used and that Germany shows growth and fiscal discipline can go together.
In a speech to lower-house lawmakers in Berlin today after a market rout that had echoes of the euro-area debt crisis, Merkel said the private sector is key to returning the region’s economy to strength and insisted that all members comply with debt and deficit limits.
“It’s unsatisfactory that only a small portion of the 6 billion euros ($7.7 billion) provided for fighting youth unemployment have been disbursed” in the European Union, Merkel said. “We in Germany are showing that growth and investment can be strengthened without leaving the path of consolidation. It’s the business world and companies that create innovation and jobs, so if we want growth in Europe we have to look first and foremost at mobilizing private capital.”
Merkel’s speech addressing a two-day EU-Asia summit starting later today in Milan and EU summits next week and in December was a demonstration of German strength even as the economic outlook for Europe’s biggest economy weakens. It was also a rebuff to countries such as France and Italy that advocate deficit spending.
Europe is leading a rout that has wiped almost $5 trillion from the value of equities worldwide as data from industrial production in Germany to U.K. manufacturing have stoked gloom. The Stoxx Europe 600 Index plunged the most in almost three years yesterday, closing down 11 percent from its June high to meet the definition of a correction.
The message from Merkel and her top aides has been to stay the course.
After her government lowered its economic forecast for this year and next on Oct. 14, she told a closed meeting of lawmakers of her Christian Democrat bloc that Germany’s situation can’t be compared with the financial crisis that led to a recession in 2008 and 2009, according to a party official. She rejected fiscal stimulus and upheld her goal of a balanced budget, another official said.
“The crisis isn’t overcome in a lasting way,” Merkel said today. “We have to pursue our efforts for sustainable growth, solid public finances and job creation resolutely.”
Lawmakers in the Reichstag parliamentary building clapped when she called the Stability and Growth Pact, which sets debt and deficit limits for euro-area governments, “the anchor of stability and, above all, confidence in the euro zone.”
Europe already has tools to spur the economy such as the European Investment Bank, Merkel said.
“When I hear that the EIB’s capital increase, which we helped bring about, has already mobilized loans for about 230,000 small and medium-size enterprises in Europe, then that’s good news,” she said.