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Merkel says 'big rethink needed' | Merkel says 'big rethink needed' |
(40 minutes later) | |
Germany's Chancellor Angela Merkel has told the World Economic Forum that a "big rethink" is needed in the eurozone within the global economy. | Germany's Chancellor Angela Merkel has told the World Economic Forum that a "big rethink" is needed in the eurozone within the global economy. |
"Structural reforms that lead to more jobs are essential," she told delegates at the Swiss resort of Davos. "Do we dare to be more European?" | |
The eurozone is still struggling with a sovereign debt crisis and is trying to agree reform to its political system. | 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. | But many want Germany and other nations to boost the size of their rescue fund. |
The International Monetary Fund (IMF) wants the eurozone to inject more cash into its rescue fund. | |
The IMF 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 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. | |
"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. | |
Lessons learnt | |
Mrs Merkel disagrees with Ms Lagarde about what is needed. | |
"We have said right from the start that we want to stand up for the euro, but what we don't want is a situation where we are forced to promise something that we will not be able to fulfil," she said. | |
"Let us take a moment to reflect what lessons we have learned from the global financial and economic crisis. | |
"Is what we have learned sufficient? There's still room for improvement. There was a glaring lack of regulation that led to the predicament." | |
Mrs Merkel said that the austerity reforms being enacted - currently being felt from the Irish Republic to Italy - had to be balanced with reforms of how Europe is governed. | |
Last year, the 17 nations that use the euro agreed to adopt reforms that would allow European institutions to punish nations that exceed their budget deficit limits. | |
Mrs Merkel also acknowledged "tensions" between countries that have adopted the euro and those that have not inside the European Union (EU). | |
Permanent arrangement | |
At a summit in December, most of the EU vowed to add about 200bn euros to the IMF's resources - which in turn could be lent to stricken nations such as Greece or to the eurozone's bailout fund. | |
The UK decided not to take part in a new treaty, leading the other nations to agree a "fiscal compact" between themselves. | |
Mrs Merkel would like the arrangement to become permanent. | |
"The main message of this fiscal compact that we are working on - the fact that every country introduces a debt ceiling in its constitution and that the European Commission and the European Court of Justice can control this - the main message is: we are ready for more commitment. We are not talking our way out of it," she said. | |
Rather, Mrs Merkel said she would work to ensure the EU develops "political structures" to make the euro work properly. | |
"I'm absolutely convinced that we will get out of this crisis," Mrs Merkel said. | |
The future of the world economy is high on the agenda as some of world's most powerful people gather in Davos. | The future of the world economy is high on the agenda as some of world's most powerful people gather in Davos. |
They meet annually in the Swiss resort to discuss the state of the world. | They meet annually in the Swiss resort to discuss the state of the world. |