Merkel warns against evading eurozone rules before EU summit (Roundup)

Mar 25, 2010, 12:58 GMT

Berlin - Germany will not tolerate deliberate evasion of the European Stability pact by other eurozone members, Chancellor Angela Merkel warned in Berlin Thursday, before an EU Summit where Greece's woes were expected to dominate the sidelines.

Merkel said the Stability pact - the basis for the common euro currency - did not envision a 'wilful undermining of its criteria, as we had to experience in the case of Greece.'

Germany was in favour of an international bail-out package, Merkel said, as a measure of last resort for eurozone member states that could no longer access capital markets.

The remarks were part of Merkel's formal statement of government policy given to the Bundestag parliament. She was later due in Brussels for the EU summit - which officially focuses on long-term economic policy.

'We cannot toy with the future of Europe,' Merkel said, demanding that all eurozone nations bring their fiscal deficits into conformity with the ceiling set out in the Stability pact.

'We can't afford to water down the Stability Pact. No trickery can be allowed,' she said, referring to Greece's breaching of European Union budget deficit rules since 2000.

Merkel said an international rescue package for Greece could only be a measure of last resort, to prevent the country's insolvency and preserve the stability of the euro currency.

Such assistance - funded by the International Monetary Fund (IMF) and bilateral aid from eurozone countries - could only apply to member states who no longer had access to capital markets, she said.

Merkel played down differences between France and Germany, stressing that they had cooperated closely to address Greece's debt problems, and would continue to do so in drawing up a framework for an eventual bailout plan.

Tensions had been anticipated over French demands for eurozone guarantees to help Greece pay its debts on financial markets - a measure opposed by Germany, the eurozone's most disciplined fiscal player.

The chancellor defended Germany's hesitant approach and said, 'A good European is not necessarily he who acts quickly.' Preserving the stability of the eurozone was more important, Merkel added.

Merkel also rejected criticism of Germany's successful export policy, which has been blamed in part for the deficits of heavy import nations such as Greece.

'It is absurd to turn Germany into the scapegoat for the problems that we are now have to overcome,' Merkel said, adding that Germany strengthened Europe's economic might.

The EU summit was to begin later Thursday in Brussels.