Germany’s Merkel Calls for European ‘Political Union’

Posted June 7th, 2012 at 3:25 pm (UTC-5)
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German Chancellor Angela Merkel says Europe needs to move beyond its common euro currency to create a “political union” in order to resolve the continent's governmental debt crisis.

The German leader says individual governments in the 17-nation eurozone gradually need to cede powers to European control, a contentious proposition on the continent. She told German public television that a currency union is not enough, and the eurozone countries need to adopt common budget policies, as well as create a fiscal union and “above all a political union.”

“I believe it is necessary for those countries which are part of the common currency to deepen their cooperation, as we are doing with the fiscal pact, and as we need to do in the future, taking further measures – always keeping in mind that our common market is what unifies us. For instance, I think that within the eurozone, we need deeper integration of the labor market, more mobility, and this may also include countries which are not part of the common currency.”

Ms. Merkel has championed austerity measures to combat the eurozone debt crisis, now in its third year and facing new challenges from weak Spanish banks and political uncertainty in debt-ridden Greece. The German leader, overseeing Europe's most robust economy, has come under increasing pressure from U.S. President Barack Obama, British Prime Minister David Cameron and others this week to help boost the continent's stagnant economic growth.

She said in the interview that “without solid finances, there is no growth,” closely linking spending restraints and economic growth.

The Madrid government, seeking help from its European neighbors to finance a $100-billion bailout of Spanish banks with toxic real estate loans, sold $2.6 billion in new bonds Thursday. But with its weakened financial condition, Spain was forced to pay a higher interest rate than in past debt sales.

Later, the Fitch financial services company cut Spain's credit rating to two steps above junk grade, and warned that it could be downgraded even more.

Meanwhile, Greece, now in its fifth year of a recession, reported that its unemployment rate hit nearly 22 percent in March, up sharply from the same month a year ago. The jobless rate for young people was especially high, at nearly 53 percent.

Some Greeks said the country's jobless situation has become desperate. An unemployed mechanic, Spiros Gazikas, said his job search has reached a dead end.

“I have been registered unemployed for two years now. I used to come to renew my card but there is no point, the programs are not working. You can sign up but no one ever calls you. There is no future.''

A 51-year-old teacher reflected a pessimistic view of Greece's labor market based on the experiences of the friends he knows.

“Everybody knows at least one unemployed person within their circle. Unemployment has risen a great deal. And from what it looks like, it is going to get worse. It will get worse.”