Merkel warns against coddling nations; Soros blasts Germany

German Chancellor Angela Merkel warned against coddling debt-wracked European countries in an interview released yesterday, arguing it was a “disservice” to the bloc to simply maintain the status quo. Merkel, who has faced criticism for trying to export the German model of budgetary rigour to the rest of Europe, said she favoured an innovative Europe rather than a Europe that was a “museum for all that was once good”. “I know that means for many a very, very big change, therefore we must support each other,” she acknowledged in a joint interview with six European newspapers. “But if we shy away from these efforts, are simply just nice to one another and water down all reform initiatives, then we are certainly doing a disservice to Europe,” she added. EU leaders are to meet in Brussels on Monday to discuss a new pact for tighter economic integration in 26 of 27 European member states – Britain has opted out – aimed at avoiding another debt crisis. Merkel said she took concerns over Germany’s dominant image in tackling the crisis “seriously” but nonetheless dispelled them as “unfounded”. She stressed the need for both solidarity and for countries to shoulder their own responsibilities, and said a “feeling for Europe” by itself was not enough to provide jobs and prosperity. “There would be no point in promising more and more money without tackling the causes of the crisis,” the German leader said. And she warned: “Amid all the billions in financial assistance and rescue packages, we Germans also need to watch that we don’t run out of steam. “After all, our capacities aren’t infinite, and overstretching ourselves wouldn’t help us or the EU as a whole.” In Paris meanwhile, IMF chief Christine Lagarde said that European public creditors would need to pitch in and help Greece if private banks and insurers did not agree to a sufficient cut in money owed to them. And Italian Prime Minister Mario Monti said the “contours” for a solution to Europe’s sovereign debt crisis were taking shape thanks to greater willingness by Germany to boost a rescue fund. “The situation is in evolution.... The contours of a possible way out of the grave crisis that has hit Europe are taking shape,” Monti told lawmakers in Rome. Meanwhile, debates about the crisis management in the eurozone marked the first day of the World Economic Forum in Davos, Switzerland, which was to be formally opened by Merkel later last night.Ahead of her keynote speech, US investor George Soros sharply criticised Germany’s role in dealing with the euro crisis.“Germany dictates policies which lead to a spiralling debt with deflationary consequences,” he said. He wondered when leaders would realise “that the currency union is on a self-destructive path.”Soros proposed that ailing countries like Greece should not just be forced to become more disciplined about their national budget, but should also receive an economic stimulus in order to prevent deflation.Other indebted countries like Italy and Spain should be able to resort to the European Central Bank and the eurozone’s bailout funds as lenders of last resort, he said.Soros accused Germany of making unrealistic demands of less economically successful members of the currency club: “The rest of Europe is not like Germany.”Financial investors and banks also came in for criticism yesterday.20th century capitalism was no longer suitable for the 21st century, said Sharan Burrow, the head of the international trade union group ITUC.Pointing to growing social inequality and joblessness, she said: “Unless employers and workers sit down with governments, the system will continue to fail.”Outside the well-secured conference venue, activists of the Occupy movement which started last year in New York set up an igloo camp.Some 2,600 politicians, business leaders and experts are attending the annual four-day meeting in the mountain resort to discuss the European sovereign debt crisis and its possible effects on the world economy, among other topics