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Davos delegates await Merkel speech Merkel says 'big rethink needed'
(about 3 hours later)
Business and political leaders in Davos hope Germany's Chancellor Angela Merkel will offer solutions to the eurozone crisis. Germany's Chancellor Angela Merkel has told the World Economic Forum that a "big rethink" is needed in the eurozone within the global economy.
Chancellor Merkel is expected to urge the 17 countries that use the euro to deal with fundamental problems underlying the crisis. "Structural reforms that lead to more jobs are essential," she told delegates at the Swiss resort of Davos.
That would be preferable to a promise of more money, she is expected to tell the World Economic Forum later. The eurozone is still struggling with a sovereign debt crisis and is trying to agree reform to its political system.
But many want Germany and other nations to boost the size of their rescue fund.
The IMF wants the eurozone to inject more cash into its rescue fund.The IMF wants the eurozone to inject more cash into its rescue fund.
The International Monetary Fund wants the sum available for bailouts to grow beyond 500bn euros ($647bn; £416bn) to ensure talks between private creditors and Greece do not grind to a halt.The International Monetary Fund wants the sum available for bailouts to grow beyond 500bn euros ($647bn; £416bn) to ensure talks between private creditors and Greece do not grind to a halt.
Urgent situation The future of the world economy is high on the agenda as some of world's most powerful people gather in Davos.
The reserves could be bolstered by merging the temporary European Financial Stability Fund with the permanent European Stability Mechanism, according to IMF's managing director, Christine Lagarde. They meet annually in the Swiss resort to discuss the state of the world.
"If the two together could make a common fund, it would be a very strong signal of confidence in Europe," she said.
The situation is urgent according to the IMF, which recently predicted that the economic growth rate in Europe could halve this year from an earlier estimate of 3.3% if the eurozone crisis remains unsolved.
In spite of such gloomy predictions, it appears likely that Mrs Merkel will resist Ms Lagarde's proposal to have public creditors contribute more.
"It makes no sense if we keep promising money but don't combat the causes of the crisis," the chancellor said in an interview with six European newspapers ahead of the speech.