By Chris Giles in Davos, Quentin Peel in Berlin and Ralph Atkins in Frankfurt
Angela Merkel, the German chancellor, spelt out her determination yesterday to overcome the eurozone crisis, but warned Europeans against demanding excessive guarantees from Berlin that it could not fulfil.
In a forthright opening speech to the World Economic Forum in Davos, Ms Merkel said Europe could recover the confidence of global markets only if its weaker economies boosted growth and competitiveness with structural reforms as well as ensuring their debts were sustainable.
Germany was prepared to show its solidarity, but ?what we don?t want is to promise something we will not be able to fulfil?.
In response to International Monetary Fund calls this week for bigger firewalls to protect European sovereign debt from speculative attacks, Ms Merkel questioned whether de?mands to double or treble the eurozone rescue funds would be credible.
?If Germany promises something that cannot be delivered if the markets attack it hard, then Europe would be left with a wide open flank,? she said. Part of the answer was to build solidarity through closer European integration, rath?er than simply to rely on Germany to guarantee the debts of weaker eurozone economies. But individual countries must also act to boost their competitiveness, and ensure their debts were sustainable.
Ms Merkel?s uncompromising message – matched by other German participants in Davos – has caused some dismay among other WEF delegates. Some had hoped that Berlin, particularly with its economic strength, would be more open to greater financing of the necessary adjustment process in the eurozone or to that role being played by the European Central Bank. Speaking to journalists at the forum, George Soros, the financier, blamed Germany for many of the eurozone?s woes.
?The austerity that Germany wants to impose will push Europe into a deflationary spiral,? he said. ?The fact that an unsustainable target is being imposed creates a very dangerous political dynamic. Instead of pulling countries together, it will drive them to mutual recrimination.?
To counter such criticisms, Ms Merkel said: ?It?s not only austerity measures, but also structural reforms that lead to more jobs.? She pleaded for patience for the results to be seen of reforms she said were happening in Portugal, Ireland and Italy.
But the contrast between the double-dip recessions predicted or being experienced in southern Europe and continued German economic success was shown yesterday as the country?s businesses reported growing confidence.
The Ifo survey of German companies rose faster than expected to a measure of 108.3 earlier this month from 107.3 in December – propelled higher by their expectations of growth prospects rather than the current situation.
The findings suggest Germany could avoid a recession, and support the Bundesbank?s view that, after a bleak winter, its economy will rebound later this year.
On Tuesday, the IMF cut its forecast for German growththis year from 1.3 per cent to 0.3 per cent and said it expected 1.5 per cent growth in 2013. But Jens Weidmann, the Bundesbank president, said the IMF was being too pessimistic.
Hans-Werner Sinn, president of the Ifo institute in Munich, said: ?The German economy has started the new year with ?lan.?
The Bundesbank expects 0.6 per cent growth this year and 1.8 per cent in 2013. Last year, Germany?s economy grew by 3 per cent – twice as fast as the eurozone overall and the US.
? The Financial Times Limited 2012