BERLIN (MNI) – German Chancellor Angela Merkel said Wednesday that
the private sector needs to shoulder significantly more of the burden
for the rescue of highly-indebted Greece.

European leaders at their summit later today will discuss how to
achieve a reduction of Greece’s public debt ratio to 120% of GDP by
2020, Merkel said, speaking in parliament ahead of a vote on enlarging
the capacity of the rescue fund EFSF.

Such a reduction of Greece’s debt ratio “can only be achieved if
the private sector shoulders significantly more of the burden than
foreseen [at the EU summit] on July 21,” the Chancellor made clear.

However, “debt relief won’t solve all problems of Greece,” Merkel
cautioned. “Painful and necessary structural reforms have to be
consequently implemented, otherwise we would…soon be in the same
situation that we are in today.”

The Chancellor argued that the current supervision of the Greek
reform process by the troika of IMF, ECB and EU Commission is not
enough. Rather, “a permanent supervision would be desirable,” she said.

Merkel again defended plans for leveraging the EFSF in order to set
up a firewall against the debt crisis. She argued that the risks arising
from the leverage are “justifiable.”

The Chancellor reaffirmed her warning that “if the euro fails,
Europe will fail.”

Merkel again stressed that involvement of the ECB in any leverage
of the EFSF “is off the table and not part of the talks” at today’s EU
and Eurozone summit. “I’ve made clear that such a solution is for the
German government out of the question,” she said.

The Chancellor again cautioned that the debt crisis won’t be solved
with one big bang. Governments will have to deal with it still in the
coming years, she reckoned.

Merkel repeated her call for a change in the EU Treaty in order to
allow more control over Eurozone member states that repeatedly violate
the Stability and Growth Pact. Yet she acknowledged that such treaty
changes are always difficult to achieve.

On the international level, Merkel called for stiffer financial
regulation, especially for the shadow banking sector. Germany will renew
its push at the upcoming G20 summit for the introduction of a financial
transaction tax, she said.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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