Germany Is Urging New Efforts From Big Economies

WSJ: BERLIN—Germany alone can't solve the euro-area sovereign debt crisis, German Chancellor Angela Merkel warned on Thursday, as she urged the world's largest economies to play their part in helping to restore growth.

Speaking ahead of a meeting of the Group of 20 industrial and developing nations, Ms. Merkel told parliament in Berlin: "The causes of the weakening global economy are indeed not only in the euro area.

 

"Everyone must be prepared to overcome their specific weaknesses," she said.

 

Since the start of the debt crisis, Ms. Merkel and Germany have come under intense pressure to do everything possible to keep the monetary union from breaking apart. As the euro zone's largest economy, Germany has accepted the greatest financial share of the bailout packages. The country has taken responsibility for as much as €401 billion ($503.54 billion) of the agreed temporary and permanent bailout programs' entire resources, according to an estimate from Credit Suisse.

Less than a week after Spain said it would seek help for its struggling banks, Italy has also seen its borrowing costs surge, escalating fears that the euro-zone's third-largest economy may also need assistance.

 

World leaders will gather for the Group of 20 meeting in Mexico next week to discuss affairs such as poverty, youth unemployment and the environment, although the main issue is likely to be the continuing debt crisis, Ms. Merkel said. While all eyes will be on the German chancellor for an answer to the crisis, she warned leaders not to expect too much from her country.

 

"Germany's strength isn't infinite. Germany's strength isn't unlimited," she said. Ms. Merkel urged the G-20 nations to resist the temptation to refinance debt. There is still work to be done for all nations to boost growth globally, she said, adding that the global crisis began with the fall of U.S. firm Lehman Brothers in 2008.

 

She called on the U.S. to reduce its budget deficit and urged China and other newly industrialized countries to allow their currencies to be more flexible. Free trade between G-20 nations is still limited, Ms. Merkel said, adding that the G-20 economies haven't taken their obligation to promote free trade seriously enough.

 

Addressing Europe, Ms. Merkel warned against "false solutions" to the debt crisis and again pressed for the euro zone to implement tighter fiscal controls before member states embark upon joint liability for each other's debts.

 

She also called for the European Central Bank to play a more significant role in the supervision of Europe's banks, following the inaccurate results of stress tests in Spain. Ms. Merkel has previously accused the European Banking Authority's stress tests of being undermined by national authorities.

 

"I wouldn't mind the ECB having a more supervisory power to stop us from dragging out these problems," she said.

 

Write to Christopher Lawton