Verheugen says Merkel ‘harms German image’

Günter Verheugen has launched a scathing attack on German Chancellor Angela Merkel over her actions in the European debt crisis.

The former vice president of the European Commission (EC) told Austrian magazine profil the situation would be different today had Merkel said from the start that Europe would let no member of the European Union (EU) go under. Verheugen claimed Merkel has become “implausible” by taking too many turns in trying to solve the current financial and public debt crisis that has shaken the Eurozone and the global stock markets. “Now she is waving the European flag again, but no one believes her claims of having a clear concept,” the former German Social Democratic Party (SPD) official said.

Verheugen said it was Merkel’s “biggest mistake” to believe that the financial difficulties of Greece could be ignored as the country was not relevant enough to seriously affect the continent’s economy. “You got the impression that the Germans simply did not care what happened to Greece. This had severe effects, of course, when it became clear that the Greek situation has an impact on everyone, especially on the German and French economies,” Verheugen argued, adding that the German chancellor and Christian Democratic Union (CDU) leader “made several mistakes and is about to seriously harm Germany’s reputation in Europe.”

The ex-EC deputy head said Greece will still be a member of the Eurozone – the union of EU member countries which use the Euro as their currency – but will still have a long way to go to restore its economic and fiscal condition. Verheugen said he struggled to find words to describe how “foolish” he rated the ongoing debate about whether a controlled bankruptcy should be considered as an option for the struggling southern European country where people have been taking to the streets to speak out against salary and pension cuts.

Referring to statements by German Free Democratic Party (FDP) Economy Minister and Vice Chancellor Philipp Rösler, who said Greece’s insolvency should be considered, Verheugen said: “You must know that those acting on the stock markets do not know whether such a statement coming from the German economy minister heralds a change of strategy of Germany on the issue or whether he just made the statement worrying about the state of his own party. They aimed at being safe themselves – and decided it signalised a German U-turn – which only makes everything worse.”

Verheugen added: “The Eurozone decided to rescue Greece – for good reasons. Europe has to stick to that. (…) It is not as if the situation is incontrollable. (…) This crisis started in 1981 when Greece joined the EU. No one cared about checking how strong the country’s economy and finances were.”

The German politician warned: “Carrying out nothing but austerity measures creates a dangerous social imbalance as the countries make cuts where they can – affecting people who earn little.” Verheugen told profil people were getting poorer and were infuriated for good reasons. He appealed to Europe and the United States to solve their crises to avoid experiencing a “lost decade”.

Meanwhile, the International Monetary Fund (IMF) has warned that the global economy has reached a “dangerous phase”. The IMF said the Eurozone’s economy will grow by 1.1 per cent next year compared to this year. Only half a year ago, it predicted a 1.8 per cent jump. The United States of America’s gross domestic product is expected to rise by just 1.8 per cent from 2011 to 2012 instead of 2.9 per cent. IMF warned the world’s financial stability could be in danger if larger EU members were hit by similar debt troubles as currently experienced by countries like Greece and Portugal. Austria’s economy will improve by 1.6 per cent from the current year to 2012, according to the IMF which said in its spring forecast that the country’s GDP may soar by 2.3 per cent.