* Sharp response to Barroso comments on austerity
* Germans point to rising debt levels in euro zone
* Fears on French deficit commitment colour Berlin stance
By Noah Barkin and Andreas Rinke
BERLIN, April 23 Angela Merkel tried to contain
her irritation when asked at a podium discussion in Berlin this
week whether southern European countries could take much more
But the frustration in her voice was clear enough after a
week in which several European allies broke ranks, and in a
public challenge to Germany, effectively declared the era of
deficit reduction in Europe to be over.
"I call it balancing the budget," the German chancellor told
her audience at a book presentation. "Everyone else is using
this term austerity. That makes it sound like something truly
Five months before Germany holds an election, Merkel finds
herself under fire from European partners and the centre-left
opposition at home for continuing to insist that euro members
"do their homework" -- Berlin-speak for reining in spending and
enacting deep structural reforms.
There are signs the criticism is beginning to grate. German
officials turn testy when the word "austerity" is mentioned
these days. In recent months, they have deliberately adjusted
their language, adopting the term "growth-friendly
consolidation" to describe their policy approach.
But Merkel's appearance in Berlin this week, and the
reaction of her closest allies to suggestions by the European
Commission that euro member states loosen their fiscal reins,
shows Germany will not soften its position.
"Declaring an end to consolidation is absolute nonsense,"
Michael Fuchs, deputy leader for Merkel's Christian Democrats
(CDU) in parliament, told Reuters. "In truth no one is really
saving anyway, they're just issuing less debt than before."
German Foreign Minister Guido Westerwelle, speaking in
Brussels, criticised Commission President Jose Manuel Barroso
for saying that austerity had "reached its limits".
Barroso's remarks on Monday came days after his colleague
Olli Rehn said Europe's G20 partners were "preaching to the
converted" in urging the bloc to shift away from a savings-first
"We are convinced that if we give up on budget consolidation
in Europe and return to the old approach of more and more debt,
then we would cement mass-unemployment over a period of many
years," Westerwelle said.
FRANCE THE BIG WORRY
In their defence, German officials pointed to data released
by Eurostat, the EU statistical office, on Monday showing that
government debt in the euro zone actually rose to 90.6 percent
of gross domestic product (GDP) last year from 87.3 percent the
However the same report showed that the bloc-wide deficit as
a percentage of GDP fell back to 3.7 percent last year, from 4.2
percent in 2011 and 6.2 percent in 2010.
The German government's critics see these figures, and the
unrelenting downward spiral in southern Europe, as proof that
consolidation has gone far enough.
The euro zone economy is expected to shrink for the second
year running in 2013. And more than one in four Greeks and
Spaniards is without a job -- a situation that Greens leader
Juergen Trittin said on Tuesday risked tearing Europe apart.
Peter Bofinger, a member of the "wise men" council of
economic advisers and a leading critic of the government's
policies, also voiced doubts.
"There isn't a single indicator I can find that suggests
this policy of aggressive deficit reduction is working," he told
He said the German economy had done well because Merkel's
government had not imposed the same cuts at home that it was
demanding of its partners.
But Merkel and her allies fear that if they lessen the
pressure, fellow euro zone members could abandon their
consolidation drives altogether, stirring anxiety in financial
markets and rekindling the crisis in the heart of the currency
Both France and Spain fell short of their deficit goals last
year. With Germany's tacit approval, they are expected to be
given more time to reach an EU target of 3 percent of GDP.
But additional leeway from Berlin is not on the cards,
officials say, unless French President Francois Hollande shows
more commitment to spending cuts and structural reforms,
including changes to rules governing the French labour market.
"France worries us above all," Norbert Barthle, a budget
expert in Merkel's CDU, told Reuters. "It now looks like they
need another year. We're willing to accept that but it can't go
Gerda Hasselfeldt, leader of the Bavarian Christian Social
Union (CSU) in parliament, said Germany was watching France
"intensively and with a degree of concern".
"In my view, the necessary reforms are not being implemented
with sufficient vigour," she said.