Merkel challenger suggests Greece should be given more time

LONDON Mon Feb 4, 2013 6:27pm EST

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LONDON Feb 4 (Reuters) - German Chancellor Angela Merkel's main challenger in this year's federal election said on Monday that recession-struck Greece should be given more time to implement its reforms even though this would cost more money.

Peer Steinbrueck, a former finance minister, said it was necessary for crisis-stricken states to get their budgets in order and consolidate sovereign debt. But Merkel's centre-right government was too focused on consolidation, he said.

"I think the application rate of these consolidation programmes must be widened, must be extended, in particular in the specific case of Greece," Steinbrueck said, speaking in English at the London School of Economics.

"It will perhaps cost some money and in my eyes it's obvious it will cost some money from Germany as well and you have to tell the people, you have to tell the electorate and that's what I miss (under the current government)."

Steinbrueck, who served as finance minister in a conservative grand coalition under Merkel from 2005 to 2009, said more economic stimulus and more stringent supervision and regulation of banks was needed alongside consolidation in struggling euro zone states.

"I think many of these countries and their governments are to a certain extent not very content with such a strategy (of) only consolidation, consolidation, consolidation because it brings these societies and economies down to austerity."

In the latest sign of discontent at austerity measures Greece needs to implement to satisfy its international lenders, Greek seamen and farmers went on strike at the weekend. The country's biggest labour union has called for a 24-hour general strike for Feb. 20.

Steinbrueck will become chancellor if Germany's centre-left Social Democrat (SPD) party wins September's federal election but the gaffe-prone politician's campaign has got off to a rough start, largely due to controversy over his lucrative earnings as a public speaker.

Merkel remains popular and a strong favourite to win a third term, especially due to her handling of the euro zone crisis.

The latest Forsa poll put the SPD at 25 percent and their Green allies 15 percent and while Merkel's conservatives dropped 2 points, they remained the biggest force at 40 percent.

Asked about the possibility of a "Brexit", or British exit from the European Union, Steinbrueck said he sympathised with British Prime Minister David Cameron's call for Brussels to increase efficiency and perfect procedures but he did not think this justified a referendum or an exit from the EU.

"On the one hand I can understand...the necessity to improve the procedures and rules of the European Union but on the other side I would never menace someone by saying 'well if I don't succeed I will leave the club'," Steinbrueck said.

"You should stay in the club. You're welcome."

Animosity towards Brussels is on the rise in Britain and Cameron said last month if he won a second term in office an "in or out" referendum on the country's membership of the European Union would be held by the end of 2017.

If elected to the post of chancellor in Germany later this year, Steinbrueck said he wanted to combat increasing social inequality by raising both income tax for some people and capital gains, investing the extra money in education.

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