German Chancellor Angela Merkel said yesterday that the eurozone crisis would dominate next week’s G20 summit, but warned world leaders that her powers to act were limited.
In a speech to lawmakers ahead of the meeting of G20 leaders in Los Cabos, Mexico, on Monday and Tuesday next week, Merkel warned that Europe could not take the easy way out with solutions based on “mediocrity” that failed to address core problems.
“All those looking to Germany again in these days in Los Cabos, who are expecting a drumroll and the answer ... I say to them Germany is strong, Germany is an engine of economic growth and a stability anchor in Europe, but Germany’s powers are not unlimited,” she said, cautioning against “overestimating” her country’s role as the sole crisis-fighter.
Merkel acknowledged that Germany found itself at center stage as world leaders fret about the incalculable impact of the eurozone debt crisis on the global economy.
“The debt crisis will be the main issue at the summit,” Merkel said. “Our country will be the center of attention — it’s a fact, all eyes are on Germany because we are the biggest European economy and a major exporter.”
However, Europe would only find a way out of the crisis with a strong “political union” that mandated greater fiscal coordination and oversight to put member countries on a “solid foundation,” she said.
US Treasury Secretary Timothy Geithner has endorsed Germany’s call for structural reforms to save the crisis-hit eurozone.
At an event at the Council on Foreign Relations late on Wednesday, Geithner waded into the debate over how to shore up the eurozone after a Spanish bank bailout fell flat, saying Germany’s position was “very reasonable.”
“What Germany is saying is [that] to make monetary union work, [they are] prepared to put a substantial commitment of resources behind this broader endeavor,” Geithner said. “But for that to work, [it] needs to be in support of reforms and changes in the institution ... and that is a very reasonable position.”
He went on to say that at next week’s G20 summit in Mexico, all eyes would be on Germany and other “major players” to clarify proposals for a European banking union and other measures to tame the crisis.
Germany champions fiscal discipline first, while new Socialist French President Francois Hollande is pushing for growth measures.