Europe has 'political will' on debt crisis: Merkel

11th October 2011, Comments 0 comments

Europe has the "political will" to combat its debt crisis, German Chancellor Angela Merkel said in Vietnam on Tuesday, with fears mounting for the continent's banking sector and the wider global economy.

Merkel arrived in Hanoi fresh from weekend talks where she and French President Nicolas Sarkozy held a pivotal meeting aimed at calming Europe's economic storm.

Eurozone members "have the political will to overcome this public debt crisis", she told reporters after discussions with Vietnamese Prime Minister Nguyen Tan Dung, according to a translation of her remarks confirmed by the German embassy in Hanoi.

The eurozone drama has sent shivers across the world over concerns it could trigger a new global recession. US President Barack Obama has called on Europeans to act fast to stem the crisis.

After the talks with Merkel in Berlin on Sunday, Sarkozy promised "lasting, global and quick responses before the end of the month".

Global markets responded with relief after the two leaders insisted they were united on the goal of stabilising the eurozone.

But Berlin said on Tuesday that Germany's economy -- Europe's strongest -- will likely slow later this year from the impact of the eurozone difficulties.

British Prime Minister David Cameron on Monday warned "time was short" for Europe's leaders scrambling to solve the debt problem.

Germany says the stabilisation plan would focus on four areas: recapitalising banks; defining the way the European bailout fund should work; supporting the work of international auditors in Greece and toughening the EU's rules on debt.

Eurozone leaders agreed in July to provide Greece with a second bailout and expand the powers of their rescue fund, in order to reinforce the 17-nation single currency against future shocks.

The new Greek rescue package has yet to be implemented and Athens is now hoping to secure a bigger debt write-down from banks.

After bailouts of Greece, Ireland and Portugal, the debt crisis claimed its first bank on Monday when France, Belgium and Luxembourg decided to dismantle Franco-Belgian lender Dexia.

In Hanoi, Merkel said Europe's ageing population makes it more difficult to reduce public debt.

The International Monetary Fund estimates it could cost as much as 200 billion euros ($272 billion) to shore up Europe's banks.

"The chancellor told me that this is a difficult issue but we believe that the euro will exist and develop, although there are still difficulties," Dung said at the same news conference.

He and Merkel, on her first visit to the country, signed a statement on working towards a "strategic partnership" to deepen cooperation between their two nations.

Germany is already Vietnam's largest trade partner in Europe, and Merkel said their talks touched on a planned free-trade accord between Hanoi and the EU.

A diplomatic source, speaking ahead of the German leader's visit, said there were hopes that a first round of negotiations on the deal could start "in the next few months".

The Asian nation is facing its own economic turmoil, grappling with the region's highest inflation, dwindling foreign reserves, a weakening currency and a trade deficit.

Merkel said she and Dung also talked about "citizens' rights, freedom of the press, freedom of speech".

The European Union has frequently chided Vietnam for its record on freedom of expression and in August called for the release of a French-Vietnamese blogger, Pham Minh Hoang.

Merkel is to travel on Wednesday to Vietnam's commercial capital, Ho Chi Minh City, before departing for Mongolia, the second and final country on her four-day tour.

© 2011 AFP

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