Germany’s Merkel defends budget discipline drive
BERLIN (AP) — Germany defended its pro-austerity stance on Tuesday, with Chancellor Angela Merkel and two ministers pressing for Europe to stick with a policy of fiscal discipline in spite of the latest bout of political uncertainty.
Financial markets in the 17 countries that use the euro were shaken Monday by concerns that an agreement on strict deficit targets agreed to by European leaders earlier this year was beginning to unravel.
French Socialist Francois Hollande, who has pledged to renegotiate the pact to give greater emphasis to growth, edged ahead of President Nicolas Sarkozy in Sunday’s first round of presidential elections. Meanwhile, the Netherlands faces early elections after its minority government collapsed over a failure to agree on austerity measures.
In addition, Spain — which is going through a harsh program of cuts and tax increases — announced it was entering a recession.
Mrs. Merkel didn’t specifically mention the deficit agreement pact in a speech in Berlin but noted that, in its early years, West Germany ran up barely any debt. She said that “today, we have to get back to that situation.”
“I want to say clearly, it is not the case that we say saving solves every problem, but if you at home talk about how you want to shape your life tolerably, then one of the first conditions is that you somehow get by with what you earn,” she said.
Mr. Schaeuble said that much has been done to strengthen the eurozone. He said that “we are in the process of winning back confidence on the markets” and cautioned against “producing new crises every two days in the media.”
“As with any glass, you can say, well, it isn’t even half full — but you can also say that there is plenty in there,” he said at a conference organized by the Association of German Banks.
“When the elections in France are over — however they look — we will see that France will remain an important partner in Europe and remain aware of its European responsibility,” Mr. Schaeuble added. “I don’t have the slightest doubt about that.”
Stock markets in Europe on Tuesday recovered some of the ground they had lost in the previous day’s turmoil. However, concerns about the debt crisis were still seen in the day’s Spanish and Italian bond auctions.
Yields on Italian two-year bonds jumped a full percentage point to 3.36 percent from 2.35 percent a month ago. Yields also spiked at a Spanish auction of short-term debt, rising to 0.634 percent on three-month bills from 0.381 percent and to 1.580 on six-month bills from 0.836 a month ago.
Germany and France, under Mrs. Merkel and Mr. Sarkozy, have piloted rescue efforts for other eurozone countries as the region has been swept up in a succession of debt crises over the past two years. Berlin has insisted on an often-criticized emphasis on budget discipline and cuts.
Mrs. Merkel pushed hard for other European countries to agree to the fiscal agreement, designed to limit government overspending, and 25 national leaders signed it earlier this year.