Merkel says deficits must be cut

GERMANY: German Chancellor Angela Merkel hit back on Saturday at criticism that Europe was threatening growth by slashing spending, saying deficits had to be cut in the wake of the Greek crisis.

"[For] the government and for Germany, the issue of not having excessively high deficits must play a key role," Merkel said after talks with Russian President Dmitry Medvedev outside Berlin ahead of a G20 summit in late June.

"We believe that growth cannot come at the expense of high deficits, but that growth must be generated in a sustainable fashion."

Medvedev meanwhile said that while Russia was extremely concerned by the eurozone crisis, he was "satisfied with the explanations" of the German leader and confident that the euro had "good perspectives."

Alongside Greece, Portugal and Spain - all of whom have seen their borrowing costs rise sharply in recent months as investors fret over their solvency - other EU members like Italy and Britain are slashing spending. France also wants to tighten its belt, and in Germany, Europe's biggest economy, Merkel's government is working on a package of swingeing spending cuts that press reports put at around 30 billion euros (35 billion dollars).

The cuts have led to concerns that the recovery in the global economy after its worst slowdown in decades last year might be stopped in its tracks.

The US Treasury Secretary made a pointed comparison between China and Europe in a visit to Berlin on May 27, saying Beijing had implemented measures that had boosted consumer spending. He did not repeat the compliment for Europe.

But with Greece's debt crisis shaking the eurozone to its foundations, European governments, faced with the long-term challenge of ageing populations, are highly wary of ramping up their borrowing.

Meseberg, Sunday, AFP