This article is part of our special report Jobs and Growth.
German Chancellor Angela Merkel is opposing economic stimulus policies that rely on new debt, amid calls to relax austerity measures from centre-left opponents in Germany and some European leaders.
In a speech on Thursday the German Chancellor told the lower house of the parliament, the Bundestag, that reducing debt and encouraging growth were “twin pillars” in European policy instead of other alternative ways.
“Growth through structural reforms is sensible, important and necessary. Growth on credit would just push us right back to the beginning of the crisis, and that is why we should not and will not do it,” Merkel said.
Since the election of François Hollande, the new socialist French president, on Sunday, Merkel has come under pressure to relax the austerity measures which she has described as the remedy for the eurozone crisis. Hollande said during his election campaign that he would seek a renegotiation of Merkel’s “fiscal compact” to secure inclusion of measures that should lead to growth and employment.
Merkel has since Hollande’s victory insisted that there is no an alternative to the debt and deficit reduction programmes that are currently being demanded from countries such as Greece in return for bailouts if they want to return to sustainable growth.
Frank-Walter Steinmeier, the parliamentary leader of the Social Democrats (SPD), said after Merkel’s speech that Germany had weathered the euro crisis well because previous governments had introduced “a blend of austerity and growth policies”.
The first talks between the new French president and the German chancellor will be watched closely for clues on how they can compromise to continue cooperation between the eurozone’s two biggest powers, which Merkel achieved with Hollande’s conservative predecessor Nicolas Sarkozy.
The two leaders are to meet for the first time next week when Hollande makes his first foreign trip as president.