German minister: Bailouts only buy time for eurozone

Endless rescue packages for indebted economies are not the answer to the eurozone's woes, German Foreign Minister Guido Westerwelle insisted Friday, urging fiscal reform at the region's roots. Speaking a day after Greece announced talks on a new IMF bailout and as Athens struggles to get creditors to write off much of its debt, Westerwelle said the region must now commit to long-term fiscal probity. "The debt economy itself has reached its limits," he told the Brookings Institution think-tank in Washington. "Rescue packages and short-term liquidity are not a solution to the crisis." "They are buying us time in which to address the root causes -- no less, but also no more." The "big bazooka" remedy advocated by many -- a massive support fund to buy time for Greece, Italy, Ireland, Spain and Portugal to right themselves -- was not enough for Europe to turn the economic corner, he said. As the eurozone's leading economy and principle creditor for any further bailouts, Germany has pressed the heavily indebted eurozone countries to quickly introduce structural reforms. He praised them for "the efforts and sacrifices they have made" in slashing spending that has taken their economies into recession. But he said, "by no means do I advocate austerity only" as the solution to the problem. "Budget cuts alone will not do the trick. Structural reforms are essential for the creation of new growth. They are also essential for the long-term cohesion of the Eurozone," he said. Germany has been the prime driver for the fiscal union pact, agreed in December, that sets strict rules for fiscal balance among participating members of the European Union, including the 17 members of the eurozone. But meanwhile the EU and the International Monetary Fund are seeking contributions to a fund of at least $500 billion dollars -- including $200 billion from the EU -- to help strengthen the region's finances. Westerwelle repeated Germany's stance that it is committed to the European Union and the eurozone. "The euro has assumed the role of a second global reserve currency... If we did not have it, we would have to invent it now -- as a lesson learnt from this financial crisis that would have had worse effects without a common currency."