UPDATE 1-Merkel says euro zone has bought itself time

Fri Jul 2, 2010 10:38am EDT

* Euro zone must consolidate budgets to secure euro - Merkel

* Germany focused on budget consolidation, not tax relief

(Adds detail, background)

By Paul Carrel

BERLIN, July 2 (Reuters) - Euro zone countries have bought themselves time to deal with the currency area's debt crisis and must now consolidate their public finances to secure the euro's future, German Chancellor Angela Merkel said on Friday.

Asked whether the euro zone crisis had abated, Merkel said a bailout for Greece and a safety net for the broader euro zone had relieved the immediate pressure.

"We've bought time for ourselves," she told RTL television in an interview.

After initial reluctance, Germany earlier this year agreed with its euro zone peers and the International Monetary Fund to the bailout for Greece. Berlin has since agreed to a 750 billion euro financial safety net.

Countries must now consolidate their budgets, Merkel said.

"This work must now be done over several years so that we can say 'the euro is secured for the long-term'," she added.

Merkel told RTL that reducing taxes for middle income wage earners was not a priority for her government at the moment -- even though the Free Democrat coalition partners are pressing for such tax cuts.

"It's not a priority," she said.

She said that the government would take a closer look at value-added tax levels after the summer recess. "We'll look at the VAT rates in the autumn," she said.

Merkel said she was pleased that public support for budget consolidation appeared to be rising, based on opinion polls.

"The first thing now is consolidation and I'm pleased to see that the people are supporting that aim more and more," she said.

Merkel unveiled plans last month for 80 billion euros in budget cuts over the next four years -- a package she hopes will bring Germany's structural deficit within European Union limits by 2013. [ID:nLDE6561E9]

However, some members of her ruling coalition want the government to tone down the budget cut plans after party rebels forced a humiliating vote over the presidency this week. (Additional reporting by Erik Kirschbaum, editing by Mike Peacock)

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Comments (4)
5yankee5 wrote:
All the concern about Greece and Portugal is a smokescreen for the basis for existence of the EU, which is to unify a bunch of countries under the banner of French arrogance. The economic powerhouse in the EU is Germany. If the EU continues to exist (a really, really bad idea) then it will be Germany that finances its continued existence.

Jul 02, 2010 11:06am EDT  --  Report as abuse
dacicus wrote:
to 5yankee5: you are mainly wrong. EU has nothing to do with the French, excepting the fact that the union is a French idea. Germany is a powerhouse, but not the only in EU.
The union is a great idea as it provides the craddle of civilization with the power to continue its influence in a world poluted by cheap products, pseudo-values, lack of ideals and pseudo-democracies.

If you want to equate cheap products, pseudo-values, etc. with countries or corporations, i am sure one can easily do that :)

Jul 02, 2010 11:45am EDT  --  Report as abuse
davidirby wrote:
I’m an American (dual national) living in Ireland and I’m pro-EU, but guardedly so. Talk about stuff like “French arrogance” is just silly. But Merkel and the leaders of the other big EU countries, now joined by Britain under David Cameron, are still drunk on the same Neoliberal economic policies that got us into the Recession. And the Irish government is Neoliberal too. (Neoliberalism is the Lazes Faire economics of Britain’s 19 th Century Liberal Party, now the economic theory of most conservatives and rejected by most liberal parties today.) Economist and Nobel Laureate, Paul Krugman says these policies will only deepen the Recession into a full Depression and I object to them on moral grounds. If Merkel doesn’t follow Barack Obama’s example and give tax cuts to lower-paid people, her Liberal coalition partners should walk.

Jul 03, 2010 5:18am EDT  --  Report as abuse
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