Unity vital for Europe, Merkel says

DAVOS, Switzerland – German Chancellor Angela Merkel insisted Wednesday that Europe will remain an economic power only if it deepens the integration that has caused it so many problems. Without that, she warned the global elite gathered in a Swiss ski resort, Europe will remain little more than a pleasant vacation destination.

The tone of Merkel’s keynote address was positive enough to feed an emerging feeling among European power brokers that Germany – and hence Europe – is finally becoming convinced that it needs to do whatever it takes to save the euro from collapse.

“The message is that we are ready for more commitment. We are no longer making excuses,” Merkel said. If Europe doesn’t integrate further, she said, “we will remain an interesting holiday destination for a long time, but we won’t be able to produce prosperity for the people in Europe anymore.”

Merkel pledged to do what is necessary to protect the euro from collapse and said greater European unity is needed to spark job creation and growth. However, she poured cold water on calls for Europe to ratchet up its safety net for failing economies.

Germany is at the center of any rescue plan because it has the deepest pockets in Europe. And Europe is at the center of the global outlook because many fear a collapse of the euro could drag large parts of the world back into recession.

For months, Germany has argued that indebted countries must cut their budgets to the bone and that their people must become poorer in exchange for help in reducing their debt loads. But many say that will do little good if that austerity causes growth to evaporate.

Merkel’s government has been unwilling to back two potential solutions to the 2-year-old debt crisis: eurobonds backed jointly by all eurozone countries, and stimulus that essentially involves getting the European Central Bank to print more money.

In the past month, business leaders and academics say they have become increasingly confident that Germany will eventually go along with measures to boost growth, possibly saving Europe from deeper crisis.

At the economic forum, there was recognition that power in the world is shifting. While the traditional industrial economies of the United States and Europe have limped through the last few years, many economies in Asia and Latin America have been booming.

Outside the conference center, activists camped in igloos to protest years of crisis in which hundreds of millions have lost their jobs even as top executives still reap huge pay packets. On Wednesday they sent aloft red weather balloons carrying a protest banner reading “Hey WEF, Where are the other 6.9999 billion leaders?”