Bloomberg News

Merkel Says Budget Critics Show Old Thinking as State Votes Near

May 03, 2012

German Chancellor Angela Merkel attacked opponents of austerity for displaying “old thinking,” saying that reducing debt is a core lesson of Europe’s financial crisis.

Merkel, in a newspaper interview published today before an appearance at an election rally in North Rhine-Westphalia, Germany’s most populous state, sharpened her criticism of the main opposition Social Democrats for embracing “the principle of first spending more money and only later tackling the debt.”

“The constant turn of the debt screw was unfortunately all too commonly used by politicians over the past 40 years,” Merkel told the Cologne-based Koelner Stadt-Anzeiger newspaper. “No good can come of it in the long run; worse, such policies are to the detriment of our children and our grandchildren because it robs them of any financial room for maneuver.”

Merkel, facing two state elections in the next 10 days, is turning her success in persuading most European leaders to sign up to a budget-discipline accord into a campaign theme. While polls suggest her stance is popular with domestic voters, it clashes with Francois Hollande, the French Socialist presidential front-runner, who says her austerity medicine is worsening Europe’s economic plight as it grapples with the sovereign-debt crisis.

Fiscal Pact

Asked if Hollande’s stated intention to reopen the fiscal pact meant the German-inspired accord was “wobbling,” Merkel said: “I don’t see it.” The pact was signed by 25 of the 27 European Union leaders, has been ratified in two countries and is going through parliament in most other EU states, she said.

“We did that because we know that stronger rules on budget discipline have to be a lesson from the crisis,” Merkel was cited as saying. At the same time, “we are united in Europe that solid budgets alone can’t bring growth and employment. That requires smart structural reforms and the right impulses.”

Merkel has honed her message on cutting debt over at least 10 appearances so far in North Rhine-Westphalia and in the northern state of Schleswig-Holstein, which goes to the polls on May 6. North Rhine-Westphalia, with about a quarter of Germany’s 82 million population, votes May 13 in the biggest test this year of her handling of the debt crisis, offering a foretaste of voter sentiment before the next federal election due in 2013.

Greek Bailout

The chancellor, who is due to address an election rally today in the town of Hamm, is campaigning to recapture North Rhine-Westphalia after the Social Democrats took the state from her Christian Democratic Union in May 2010, days after she backtracked and agreed to a first bailout in Greece. The result deprived Merkel of her majority in the national parliament’s upper house, the Bundesrat, where states are represented. While polls suggest the SPD will retain power with the Greens as junior partner, they show the CDU closing the gap.

The chancellor sought in the newspaper interview to contrast the “new, better answers to budget problems” espoused by the CDU, led at state level by federal Environment Minister Norbert Roettgen, with SPD Prime Minister Hannelore Kraft’s regional government, which she said spends first and worries about debt later.

“It’s therefore high time to turn away from this old thinking,” Merkel said.

To contact the reporter on this story: Alan Crawford in Hamm, Germany, via acrawford6@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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