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Merkel: Time to reform is now

January 24, 2013

German Chancellor Angela Merkel has told business leaders in Davos that governments need to continue efforts to bring borrowing under control while there's political will and pressure to do so. She also lauded progress.

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German Chancellor Angela Merkel addresses delegates during the annual meeting of the World Economic Forum (WEF) in Davos January 24, 2013. (REUTERS/Denis Balibouse)
Image: Reuters

On Thursday, Chancellor Angela Merkel acknowledged the ongoing eurozone difficulties, though she also said she believed that "we have indeed made considerable progress in this area in the last few months."

Merkel called the World Economic Forum's 2013 motto - resilient dynamism - "fitting," because it alluded to a dynamism that focused not on "speed at any price," but rather on a system that could withstand economic shocks.

Though the chancellor said that, for her, "budget consolidation and economic growth are two sides of the same coin," she also warned against impulses to reduce the pace of reform in the face of economic stagnation. The conservative chancellor pointed to Spanish record unemployment figures released on Thursday as an example of the difficult balancing act, and said she understood the urge to balance the books during periods of growth.

Merkel # 24.01.2013 # merkel # journal englisch

"But on the political side, experience tells us that often pressure is required to enable structural reform," Merkel said, advocating a tough course now to reach "a better tomorrow."

Little on Britain

Merkel also alluded to tax evasion and avoidance, and regulation of the financial markets in her speech, saying she hoped the US would adopt new banking sector rules known as Basel III.

"In 2008 we were all unanimous that every financial institution and every country should be subject to clear rules. Now, we are far from that position," Merkel said.

The German chancellor made only limited reference to British Prime Minister David Cameron's pledge on Wednesday to provide an "in/out" referendum on European Union membership - if he wins re-election.

Davos operator Klaus Schwab asked Merkel about her opinions on the matter after her address, however. The chancellor said little about Britain or Cameron, pointing instead to the ability of non-eurozone members - like Britain - to participate in all systemic changes that are mandatory for euro countries.

Following Cameron

Speaking earlier on Thursday, Cameron said his plan for an in/out referendum on EU membership in Britain - to take place only if Cameron wins re-election and almost certainly not before 2017 - was "not about turning our backs on Europe, quite the opposite. This is about how we make the case for a more competitive, a more open, a more flexible Europe, and how we secure the EU's place within it."

"There is a big, looming, insistent question - and that is, how do we compete and succeed in the global economic race that we are in today," Cameron told assembled politicians and business leaders at the Swiss ski resort.

Merkel and Cameron lay out differing European visions at Davos

The Conservative premier said the changes he would seek to the EU treaty would aim to respond to this question, claiming he was compelled to act owing to other changes within the bloc.

"The club we belong to is changing, we can't ignore this, change is under way," Cameron said. "And the debate about what this means, it is live, it is happening right now." The prime minister referred in particular to changes tied to the banking sector and the single currency, the euro, a currency Cameron said Britain was "frankly never likely to join."

Cameron's speech on Wednesday ruffled many feathers in Europe, with German Foreign Minister Guido Westerwelle saying that Britain could not "cherry-pick" its terms of membership.

msh/pfd (AFP, dpa, Reuters)