BERLIN – GERMAN chancellor Angela Merkel said that Europe’s heavily indebted nations must push ahead with structural reforms yesterday, to get their economies back on track and must not rely on government spending to foster growth.

Labour market and other reforms do not heal economies overnight but are the right way toward sustainable growth, Merkel said. “It would be absolutely wrong” not to pursue the path of reforms, she added.

The leader of Europe’s biggest economy has long advocated a mix of austerity measures and structural reforms, especially for struggling southern European nations like Greece, as well as Ireland, which had to be bailed out by its European peers.

Over the past weeks, as the continent has teetered on the brink of a recession, she has increasingly come under fire from many of her European counterparts, who have rallied behind French President Francois Hollande’s calls for a regional growth strategy.

Germany has shown solidarity with its European partners, Merkel told a gathering of her conservative Christian Democratic Union (CDU) in Berlin, but “we must learn from the mistakes of the past” and end governments’ addiction to financing spending with borrowed money.

Joerg Asmussen, a member of the European Central Bank’s executive board, backed Merkel’s stance but stressed that more must be done over the coming years toward a deeper integration of the eurozone “to get over the currency union’s construction mistakes”.

One of the most pressing steps is to create a “financial market union” that would boast a centralised institution overseeing and guaranteeing banks’ deposits, he said.

“It would be an important step toward stabilising the currency union if we can implement this element swiftly,” he told the CDU party gathering.

A Europe-wide solution would ensure that the failure of a single big bank cannot endanger the eurozone as a whole, he said.

“If the biggest Californian bank is in trouble, that does not endanger the stability of the United States,” he added, saying that the American system provided more stability thanks to the Federal Reserve’s central oversight and the FDIC’s nation-wide deposit guarantee.

But many European policy makers remain reluctant to share bank oversight and deposit guarantees. Germany and other financially healthy countries say such measures could see their taxpayers pay for the rescue of banks in another country.

Merkel has maintained that a so-called banking union can only be among the final steps of Europe’s integration, once national policies have been harmonised and the worst financial imbalances ironed out. In other words, not now.

She also reiterated her opposition to jointly guaranteed debt, so-called eurobonds, as a short-term fix to the continent’s lingering debt crisis. She said Germany wants a deeper European integration, saying “it must always be ensured that joint liability and joint control lie within one hand”.

Countries that have received a bailout, such as Greece, cannot expect that the attached conditions be relaxed, even if those governments face a popular backlash, she said. Europe will only be taken seriously if the governments live up to their commitments, she added.

Merkel explicitly welcomed Spain’s recent application for up to ¤100 billion ($10.9 trillion) in rescue loans from its European partners to shore up its ailing banks. She stressed that, in return, the government in Madrid must meet the conditions that will come with the assistance, although those would not be as far-reaching as those for Greece and Portugal, which needed much broader bailouts.

AP