Germany Continues to Balk at Increasing Europe Rescue Fund

January 23, 2011 at 02:07 PM

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Germany's Foreign Minister Guido Westerwelle said Sunday that comments by Jose Manuel Barroso, president of the European Union's commission, that the amount of the European rescue fund should be increased were "not helpful."

Westerwelle, who made the comments in the Handelsblatton Sunday prior to Monday publication, said that the lesson from the debt crisis was to stop increasing debt, according to a Reuters report. Berlin has been critical of plans to increase the amount of the European Financial Stability Facility (EFSF), as well as resisting the idea of joint-issued bonds from the euro zone.

In another report, Westerwelle said of the joint bond issue, "A communalization of national debt would take the pressure off budget consolidation. Thus it is important to stick with the principle of national responsibility for debt." He did, however, call for closer euro zone coordination of economic and fiscal policy.

He criticized Barroso's advocacy of an increase in the EFSF, saying, "If the hypothesis … is true that economics is half psychology, then such remarks are not helpful."

Germany's economy has far outdistanced its euro zone companions, growing 3.6% in 2010 as other members of the group struggled with crushing debt loads. Its growth rate was the fastest since reunification.

However, Wolfgang Franz, chairman of Germany's panel of economic advisors, said that the rate of growth should not cause undue optimism. "The trees will not grow sky-high this year," he said in the Handelsblatt. "In important trade partners like Spain, Portugal and Britain there will be consolidation this year. That's not exactly going to increase their imports.