Merkel wants European growth, but no stimulus spending

BERLIN Tue May 1, 2012 4:17pm BST

The European flag is reflected in a window as German Chancellor Angela Merkel waits for the arrival of Grand Duke Henri of Luxembourg at the Chancellery in Berlin, April 24, 2012. REUTERS/Thomas Peter

The European flag is reflected in a window as German Chancellor Angela Merkel waits for the arrival of Grand Duke Henri of Luxembourg at the Chancellery in Berlin, April 24, 2012.

Credit: Reuters/Thomas Peter

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BERLIN (Reuters) - Angela Merkel is against economic stimulus programmes to boost growth in Europe but is open to the idea of strengthening the European Investment Bank (EIB), the German chancellor was quoted as saying on Tuesday.

In an interview with the Hamburger Abendblatt newspaper to appear on Wednesday, Merkel said that she did not believe growth could only be spurred by costly government stimulus measures.

"It's important that we get away from the idea that it always costs money to get economic growth," Merkel said, according to an advance excerpt from the interview.

"Sustainable growth is based more than that on education and research, and on the innovative strength of small and medium sized companies."

Germany, which pulled its economy out of a tailspin in 2008/09 with a record 81-billion-euro stimulus programme, has led calls for euro zone governments to continue to focus economic policy tightly on austerity measures as the region's current crisis has worsened.

But with voters in many countries becoming increasingly disillusioned with successive waves of belt-tightening, pressure for pro-active growth initiatives is growing.

In France, presidential election frontrunner Francois Hollande, wants to recast the euro zone's deficit-constraining fiscal pact if he wins Sunday's second-round vote and has urged the European Central Bank to do more to stimulate growth.

Merkel, who warned against relaxing the pact, said it would be better to pursue measures "that require political courage and creativity more than billions".

Merkel said labour markets need to be opened up by reducing barriers to hiring young people and improving professional training systems.

After recovering from a downturn that saw its economic output fall by nearly five percent in 2009, Germany's economy has recovered strongly - in part with the help of stimulus funding for job training.

Unemployment has since fallen to a post-unification low of 6.7 percent, contrasting starkly with other euro zone countries such as Spain where jobless rates are up to 24 percent.

Reiterating comments to another newspaper at the weekend, Merkel told the Abendblatt that Germany supports strengthening the EIB, the European Union's investment arm, and using the region's structural funds more flexibly.

Luxembourg Prime Minister Jean-Claude Juncker, who chairs meetings of the euro zone's finance ministers, said on Monday it was conceivable the EIB might get a 10 billion euro capital increase.

(Reporting By Erik Kirschbaum; Editing by John Stonestreet)

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