Germany Presses For Cuts As Merkel, Sarkozy Meet

Published January 9, 2012 11:00AM (EST)

BERLIN (AP) — Germany's finance minister on Monday pressed struggling eurozone countries to implement their deficit-cutting pledges, saying ahead of a meeting between the French and German leaders that efforts to tackle Greece's problems "could go faster."

Germany has insisted on austerity measures in the eurozone's fight to lower budget deficits and regain investor confidence. Europe is working to hammer out a new treaty enshrining tougher budget rules, which leaders agreed to at a summit in early December.

"The countries that have problems with overly high deficits must credibly reduce their deficits; the competitiveness of all economies must be strengthened," German Finance Minister Wolfgang Schaeuble said in an interview with SWR radio ahead of the year's first meeting between Chancellor Angela Merkel and French President Nicolas Sarkozy.

"The European currency needs a fiscal union so that all countries are guaranteed to keep to the agreed rules," Schaeuble added. "And if that happens, then the rescue funds we have agreed on will suffice."

Merkel spokesman Steffen Seibert said promoting growth and employment would be key issues at Monday's meeting. Still, Schaeuble focused heavily on Germany's push to tackle "the causes that led to the crisis."

"That goes in particular for Greece — Greece must implement what has been agreed; all the rescue funds in the world won't help if the causes aren't tackled credibly," he said.

"Greece is working on that, we are in negotiations — but that could go faster, we are very much pushing for that," Schaeuble added.

Greek Prime Minister Lucas Papademos warned union leaders and business groups last week that decisions made in the next few weeks, ahead of a new visit by international debt inspectors, will determine whether Greece remains in the 17-nation eurozone.

Greece is also working to finalize a second, euro130 billion bailout, without which it can't pay its debts, and strike a deal with creditors for a 50 percent reduction in their holdings of Greek debt to try to put the country back on its feet.

"We have always said that Greece must decide itself, must do what is necessary, because without Greece pushing through reforms the problems cannot be resolved," Schaeuble said.

Monday's meeting of Merkel and Sarkozy comes ahead of new Italian Premier Mario Monti's first visit to Berlin Wednesday.

Merkel spokesman Seibert said the chancellor plans an "informal" meeting in Berlin Tuesday evening with IMF chief Christine Lagarde.

Merkel and Sarkozy will travel to Italy on Jan. 20 before a European summit at the end of the month.

Italy is a key focus of the crisis because of its size, huge debt load and need to borrow heavily in the first quarter. The yield on its 10-year bonds rose back above the 7 percent level that is considered a danger mark late last week.

By Salon Staff

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