And the International Monetary Fund revealed it is looking for ways to lessen the social problems caused by strict fiscal programmes that it puts countries like Greece through when it steps in to repair their bad finances.
Merkel told her annual press conference that Greece must implement the changes demanded by the EU and IMF, arguing that slowing the reforms would simply prolong the pain.
Instead, the country should press on with the reforms and regain lost competitiveness and prosperity as fast as possible, she explained.
Meanwhile an IMF report out yesterday shows the Fund is concerned about the social impact of tough spending plans, and so tries to protect social spending.
However, it also said Greece’s situation is so severe that “successful crisis resolution has required significant cuts in expenditures, including in social sectors, and in real wages”.
“These cuts have undoubtedly been painful for many in the concerned countries,” it said. “Even within the constraints of these cases, the Fund has supported designing measures to target social protection better on the most vulnerable segments of the population and to promote a broad distribution of the negative impact.”
Merkel also warned the new banking union is “pretty unlikely” to be in place by January, as planned by the European Commission. Instead she urged authorities to avoid rushing its creation..
“It is not a matter of coming up with something as soon as possible which will also end up not working, but of winning back credibility,” she said.