(For more on Europe’s debt crisis, see EXT4.)
Jan. 9 (Bloomberg) -- German Chancellor Angela Merkel signaled that investors are wrong to rely on the European Central Bank to resolve the euro-area debt crisis in the absence of political union in Europe.
“The hope that we look to a single central bank to come in when we’re in a difficult situation, this hope I hold to be illusory,” Merkel said in a speech today to the IHK trade chambers in Dusseldorf, Germany, without mentioning the ECB by name. “The situation in Europe without political union is not comparable to that for example in the U.S.”
Merkel’s comments put the emphasis on governments to tackle the crisis that emerged in Greece and is now placing the euro’s future in question before closer European economic and political integration is achieved. Merkel and French President Nicolas Sarkozy said earlier today that euro-area leaders may complete work on their fiscal compact by Jan. 30, one month ahead of schedule.
While the situation in the euro area is “serious,” the medium-term outlook is “good,” Merkel said. “But we haven’t won back trust yet,” she said. “Convincing the markets is the big challenge.”
The euro rebounded from the lowest level versus the dollar since September 2010 after Merkel and Sarkozy announced their plans in Berlin today. It was up 0.3 percent at $1.2758 at 2:04 p.m. in New York.
The euro at 10 years has proven itself, and the currency area’s leaders must now strengthen the euro through “more Europe, not less Europe,” Merkel said.
“The currency was introduced as a visionary step, the foundations weren’t sufficiently prepared,” she said. Resolving that contradiction through closer economic integration “is the task for the next years.” To that end, it’s “good news” that the fiscal compact will probably be negotiated by the end of January, she said.
Merkel rejected government economic stimulus as the only means of bolstering growth in European countries struggling under austerity. Europe’s structural and cohesion funds had some 350 billion euros ($447 billion) at their disposal from 2007- 2013 that might be better targeted to boost growth, she said.
“It’s not as if in Europe there’s no money to improve weaker members,” Merkel said. “We have to aim for excellence, for best practices, and not just somehow end up with mediocrity. Then as a continent, we’d have no chance.”
--Editors: Alan Crawford, Simone Meier
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