July 22, 2024

Merkel Warns Against Inaction in Debt Crisis

BERLIN (AP) — German Chancellor Angela Merkel said Saturday that it was important to help indebted European countries in order to assure that a global economic upswing, and Germany’s economic health, were not undermined by further debt woes in the Euro zone.

In a message apparently intended to convince a skeptical German public that Greece and other struggling economies should not be allowed to default, Mrs. Merkel asserted that Germany’s own economic recovery could be endangered. “If we don’t act right, that could happen,” she said in her weekly video podcast, “but that’s exactly what we want to avoid.”

“That’s why we say that we cannot simply allow an uncontrolled bankruptcy by a country,” Mrs. Merkel said, adding that Europe needed to see how it could help struggling countries improve their competitiveness and also allow them to reduce their debts. She did not mention Greece by name.

“We must do nothing that endangers the global upswing as a whole and would then put Germany in danger again,” she said.

Mrs. Merkel said that the German economy contracted by nearly 5 percent in 2009 following the global financial crisis, saying “there hadn’t been anything like it in decades, and anything like that absolutely has to be prevented from recurring.”

Wolfgang Schaeuble, the German finance minister, is pushing for Greece to get more rescue loans only if investors agree to get repaid seven years late on their Greek bonds. That would give the country more time to get a handle on its debt of 340 billion euros ($491 billion).

That demand is meant to rally support among the public and, particularly, lawmakers in Merkel’s center-right coalition — some of them restless at the idea of giving Greece more money.

However, the European Central Bank, concerned about the reaction of the markets, says that Greece must not change the terms of its debt in ways that would put it in official default. Nevertheless, the head of a group that represents Germany’s private-sector banks signaled readiness to discuss the proposal.

Ratings agencies have said that a bond repayment that materially disadvantages bondholders would be considered a default. Germany has remained vague about some crucial details, such as interest rates and collateral provisions.

Article source: http://www.nytimes.com/2011/06/12/business/global/12euro.html?partner=rss&emc=rss

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