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Germany 'doesn't have the strength' for more stimulus

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(GlobalPost/GlobalPost)

Germany does not have the economic strength to launch another stimulus package now without running the risk of losing market confidence, Chancellor Angela Merkel said on Monday.

In 2009, Germany boosted its crisis-hit economy, Europe's biggest, with large-scale spending, especially to boost employment.

However, now, said the chancellor, "we do not have the strength for a second economic package without losing international confidence."

In the debate about how to help eurozone countries hit by high deficits, debt and recession, Merkel has long stressed the need for structural reforms and cost-cutting to rebalance public finances.

Critics especially in southern Europe and France have charged that the fiscal discipline approach stifles growth and adds to the economic pain, calling instead for greater stimulus measures that would revitalise demand.

Last week, US Treasury Secretary Jacob Lew urged Europe's strongest economies to help spur growth, after talks with his German counterpart, Finance Minister Wolfgang Schaeuble, in Berlin.

"Policies that would help to encourage consumer demand in countries that have the capacity would be helpful," Lew said at the time.

Merkel spoke ahead of a meeting of G20 finance ministers and central bankers in Washington on April 18 and 19, when the International Monetary Fund and World Bank will also hold their spring meetings.

There have been growing signals from inside the IMF in favour of an easing of austerity in the eurozone to boost economies in the 17-member currency block and to help revitalise the global economy.

Merkel, speaking on Monday to an audience of bankers, also took care to highlight progress in regulating the financial system, but warned that much work remained to be done.

"We have promised the public that every financial center, every actor, every financial product, is subject to regulation, and we are still far from that," she said, calling for the G20 to pursue efforts in this direction.

Merkel said that banks had not yet fully regained the trust they lost during the financial crisis and reminded financial institutions that part of their role was to support the wider economy.

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http://www.globalpost.com/dispatch/news/afp/130415/germany-doesnt-have-the-strength-more-stimulus-1