Merkel determined to solve debt crisis

26 Jan 2012, 9:58 am   -   Source: AAP
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German Chancellor Angela Merkel says she is determined to solve the European debt crisis with political unity.

German Chancellor Angela Merkel has expressed determination to solve Europe's debt crisis through greater political unity, but dashed hopes of a big injection of money for the region's bailout fund.

Urging the European Union to act more like a central government for the region, she acknowledged that the countries that share the euro don't have the "political structures" to make the common currency work properly.

She spoke at the opening of the World Economic Forum in Davos on Wednesday, where members of the global business and political elite are looking to Germany to prevent a breakup of the euro, which could hurt the economy worldwide. Many participants said they see increasing evidence that Merkel will do so.

"The message is that we are ready for more commitment. We are no longer making excuses ... That is important because otherwise we will continue to lose credibility," Merkel said.

She said the euro's shortcomings "arose over years, so they can't be overcome in one fell swoop."

"It will take time to overcome these shortcomings," she added, "but we are determined to do this."

Merkel did not immediately elaborate on how that would happen, but appeared to rule out one solution that some leading figures have called for - a big boost to the eurozone's rescue pot created to help weaker eurozone nations struggling with debts.

"We guarantee the euro, but what we don't want is to promise something we can't hold to," she said.

Germany has said it does not currently see any need to increase the region's long-term bailout fund, the European Stability Mechanism, but has noted that European leaders already agreed to review the fund's size in March.

Merkel acknowledged that the 17 nations that use the euro are not tied together enough politically.

"We have taken some steps closer to a fiscal union," she said. "But we can get faster, gain speed and become more decisive."

Overall, she sought to strike an optimistic tone, despite the pessimism that haunts some of the Davos participants amid worries over Europe and a looming slowdown in developed economies.

"Europe will become more attractive (for foreign investors) once we've got through this euro crisis, and I'm sure that we will get through it," she said.

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