BERLIN Germany will stick to its austerity course despite mounting criticism and thinks other countries in the single currency bloc should also keep up a drive to consolidate their budgets, senior German politicians said on Thursday.
Germany has been criticised by some euro zone partners for insisting that crisis-stricken states cut their deficits, especially after a meeting of the G20 called last weekend for the bloc to move away from its emphasis on saving first.
Economy Minister Philipp Roesler said Germany understood that it was difficult for individuals, companies and governments to continue reining in their spending but insisted that this was the right course.
"On this point, this government will always remain firm. We are very worried and I would like to warn all states in Europe against softening this course of consolidation," Roesler told a news conference.
"(That's) because what has been achieved in the last couple of months on the consolidation front has led to a much more stable situation than we had almost a year ago," he said, pointing to lower borrowing costs in crisis-stricken states compared with a year ago.
Earlier this week Italy's two-year debt costs fell to their lowest level since 1999 and Spain sold 3-month bills at the lowest yield on record.
"There are always some who want to stray from this path (of austerity) but it is still right to place importance on budget consolidation," Roesler said, adding that there was no other way for the region to emerge from its crisis.
Roesler was speaking after the publication of his ministry's revised forecasts for Germany that see the economy growing by 0.5 percent this year - up 0.1 percentage points from the previous estimate - and by 1.6 percent in 2014.
Chancellor Angela Merkel also said on Thursday that Germany would continue to work towards balanced budgets and rejected French Finance Minister Pierre Moscovici's accusation that Germany was too heavily focused on saving.
"We need to find a way to have solid finances and of course growth at the same time," she told a banking conference.
Roesler refrained in his remarks from criticising France, the region's second largest economy which failed to meet its budget deficit goal last year.
"We know that they (the French) are doing all they can to become more competitive and to get back to growth to pay off the debts they have racked up," he said.
Earlier on Thursday, German Finance Minister Wolfgang Schaeuble said European governments, including France, must continue with reforms to tackle deficits but signalled there could be some flexibility on deficit targets.
"Of course France must follow a path of structural reform," Schaeuble said on German radio, saying its labour and administrative costs were too high.
"France knows that. You cannot change that overnight, you have to tackle it step by step so that it is credible. Then you can be more flexible on the question of what year you have what deficit. That has never been questioned."
(Additional reporting by Andreas Rinke; Writing by Michelle Martin, Editing by Gareth Jones)