CHANCELLOR ANGELA Merkel threw down the gauntlet in Davos yesterday, telling the world’s banking and business elite that Germany will not throw endless cash at the euro zone crisis to appease the financial markets.
After landing last night in the Swiss mountain resort, Taoiseach Enda Kenny will tell the World Economic Forum this afternoon that, despite difficult decisions, Ireland’s recovery is on track.
In a busy schedule of forum contributions and background briefings, Mr Kenny will push a “relentless focus on job creation”, according to Irish officials, and sell Ireland as “the best small country in the world to do business” in four years’ time.
His optimistic message will be a welcome respite from the downbeat opening speech by Dr Merkel yesterday, demanding time for euro zone reforms to work and dismissing calls for greater German involvement in the rescue effort.
Her address was a clear response to calls from Italy, the International Monetary Fund and the World Bank for Germany to show greater leadership and readiness to underwrite rescue efforts.
The German leader was having none of it: fighting debt with debt was not credible and solidarity was not simply a question of finance. Throwing too much money at the euro zone crisis would, she said, eventually cost Europe even more confidence among investors.
“We aren’t saying in Germany that we don’t want to show solidarity, but we don’t want to be in a situation in which we promise something we can’t deliver,” she said, delivering a flat rejection of calls to double or triple the capacity of the bloc’s rescue fund.
“If Germany . . . promised something like that and if the markets attacked, we would not be able to come up with what’s needed and we would have an open flank.”
Drawing a line between leadership, solidarity and rescue fund contributions, she said: “How much we stand up for each other is not just about how much money we make available to each other.”
To her European neighbours, she said ongoing negotiations over a new fiscal compact were only the beginning and that “we’ll need to pull together even closer” once reforms have been agreed.
“Everyone knows it will take longer than 12-18 months, that we have enough breath to allow these reforms to work,” she said, “and not to turn around half-way along and say ‘that won’t work’.”
Dr Merkel tackled the many criticisms levelled at Germany since the start of the financial crisis.
On the claim that Germany had created imbalances within the euro and contributed to the crisis because of its sizeable trade surplus, she said Germany would work to “unfair barriers”.
“But when imbalances result through different levels of competitiveness, I ask: do we want coherence without ambition? Shall we drift towards the Mediterranean or look to who is best and try to follow them?” she asked.
“This is not about who is strong or less strong but about producing wealth here in Europe. And I think there’s no harm in being ambitious on that front.”
On the criticism of a growing Franco-German diktat in the euro-zone crisis, she reminded her audience that Berlin and Paris had always been attacked for agreeing common positions before EU summits and slated if they didn’t.
Asked if she ever had any doubts or despair in the crisis, Dr Merkel said: “If I despaired, I wouldn’t be sitting here.” But she did have occasional worries about the time it takes to do anything.
Before her take-no-prisoners speech, Dr Merkel dished out another dose of tough love to leading financiers gathered at Davos. One attendee described her private performance as “even more impressive than her speech”.
Not all attendees were enamoured with her speech. “She didn’t go into detail, it was just more of the same,” said a senior French banker who asked not to be named. Attendees already have the answer to one pressing question: on boosting Europe’s bailout fund, the lady is not for turning.
