Southern European states going in right direction -Merkel

BERLIN, April 19 Thu Apr 18, 2013 6:00pm EDT

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BERLIN, April 19 (Reuters) - Crisis-stricken southern European states are heading in the right direction with their reforms but countries in the single currency bloc need to become much more competitive, German Chancellor Angela Merkel was quoted as saying on Friday.

"All southern European countries have more or less initiated the reforms that are necessary to get them back on a sound path," Merkel said in an advance copy of an article due to appear in the German mass-circulation daily Bild on Friday.

She said she was aware that many people were suffering due to spending cuts, but added that in the long-term countries needed to cut their cloth according to what they produced.

"Every country needs a competitive economy and an industrial base, be it big or small. We can no longer finance prosperity with credit - that must be clear to everyone," Merkel was quoted as saying.

She said Germany was proof that reforms work. Labelled the "sick man of Europe" a decade ago due to a rigid labour market, ineffective bureaucracy and low competitiveness, Germany has since become an economic success story thanks to labour market reforms and years of wage restraint.

Merkel said euro zone states needed to become significantly more competitive if Europe is to play a leading role in the world. "There is still a great deal of work to be done on that", she was quoted as saying.

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