German Chancellor Angela Merkel (R) talks with Interior Minister Hans-Peter Friedrich (L), as Economy Minister Philipp Roesler looks on, before a debate in the Bundestag, the German lower house of parliament, in Berlin, Thursday. — ReutersBERLIN — German Chancellor Angela Merkel acknowledged Thursday that Europe’s lingering debt crisis will dominate this weekend’s summit of the world’s 20 most important economies in Mexico, but she stuck to her conviction that the region’s crisis can only be solved by keeping a tight rein on government finances and introducing structural reforms.

“We must all resist the temptation to finance growth again through new debt,” she said in an address to parliament before leaving to the gathering of world leaders. “We can only overcome the crisis when we tackle it at its roots, the high debt level and the lack of competitiveness in some member states,” she maintained.

Europe’s debt woes “will overshadow all other topics” at the meeting, with the eyes of the world’s leaders on Germany as Europe’s biggest economy to fix the crisis and to do more to spur growth, she said.

“But strengthening growth and budget consolidation must go together,” she added.

Merkel is widely viewed as the European leader most prominently championing fiscal discipline and austerity measures, in particular for the southern European nations that are the hardest hit by the crisis, such as Greece, Portugal or Spain. But Germany’s stance is coming increasingly under fire, with the political tide in Europe shifting toward seeking ways of fostering growth as the bloc is on the brink of a recession.

U.S. President Barack Obama has repeatedly called on European leaders to do more to overcome the crisis which poses a threat to the world economy.
In Europe, France’s new center-left President Francois Hollande has led efforts to forge a new growth initiative for the bloc’s ailing nations.

Germany’s center-right government has recently embraced such an initiative in principle, but Merkel has ruled out using fresh money, insisting instead on reforms and a repackaging of existing EU funds.

“When 27 European nations simultaneously do nothing but tightening their budgets, then this is not a way out of the crisis, that is the way into recession,” German opposition leader Frank-Walter Steinmeier said in a response to Merkel’s speech.

Fiscal consolidation must be accompanied by growth stimulating measures, he said. “Ever new bailouts do not help if we strangulate growth in Europe,” he added, referring to the rescue loan packages European nations provided to Greece, Portugal and Ireland to keep those nations afloat. — AP