Reforms ‘still needed’ after ECB action: Merkel

German Chancellor Angela Merkel told the World Economic Forum in Davos on Thursday that any action by the European Central Bank to boost the eurozone's struggling economy should not ease the pressure on governments to enact reforms.

Reforms 'still needed' after ECB action: Merkel
Angela Merkel at Davos meeting. Photo: World Economic Forum

Merkel, who addressed the Swiss gathering of business and political elites minutes before the ECB unveiled its €1.1 trillion bond purchase programme, insisted that governments must seize the opportunity to "do your homework as regards your fiscal consolidation".   

"No matter what sort of decision the ECB will take, we should not become diverted from the fact that we as politicians need to put a framework for recovery in place," Merkel told the forum.
"Europe continues to be confronted by great challenges," said the chancellor, a regular Davos visitor.

"We have often talked about the debt crisis . . . we have this somewhat under control but we are not out of the woods yet." 
The European Central Bank has come to the rescue of the eurozone on several occasions since Greece nearly dragged down the bloc with its debt, with the bank unleashing an arsenal of unconventional measures since late 2011 to calm jittery markets.
Interest rates have been pushed to a record low and massive amounts of liquidity unleashed on the market to stimulate the economy.
But growth has proven elusive with the bloc managing just an 0.8 percent expansion in 2014 and one percent seen for this year.

Unemployment also remains stubbornly high, well above ten percent.
On Thursday, the ECB deployed the unconventional weapon of bond purchases to prevent the bloc from sliding into deflation.

'Time to do homework' 

Merkel told governments that the breathing room given by the ECB should not be wasted, warning that one day, the stimulus measures would have to be removed.
"Italy is carrying out very ambitious reforms," she said.

"France is on the way to doing that. But others have already done it." 
Germany has led a chorus of opposition to the bond buying scheme, believing that it might give some countries less incentive to reform.
That stance has drawn criticism from others arguing that Europe's economic giant should loosen its purse strings more to help its neighbours.
But Merkel defended her country's stance, saying it would be irresponsible for her government to do otherwise.
"Some people accuse us of being too tight with our money but let me remind you that Germany has a massive demographic challenge," she said.

"More than six million people will be lost to our market because they are retired.
"If we don't keep our debts down then we will leave a very heavy burden to the next generation . . . this would be irresponsible." 

Ahead of the ECB's latest announcement, former Bundesbank chief Axel Weber also put up a harsh criticism of its repeated moves to undertake unconventional measures to stimulate the economy.
"The real issue is the ECB has continuously bought time for European policy makers to fix the issue," Weber said, but "they didn't do that" in the past few years.
"Europe has lost the good opportunity to do many necessary things they could have done in a more benign environment."
Separately, Eurogroup chief Jeroen Dijsselbloem sang the same tune.
"Whatever the ECB does, it doesn't take us off the hook," said Dijsselbloem, who is also finance minister for the Netherlands.

"We really have to step up pace in making our economies more competitive and that's something that the ECB cannot do for us," he told AFP.

"They can give us more time, they can take off a little pressure, they can be accommodative but they cannot fix the competitiveness of Europe." 

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Switzerland: 2021 Davos summit shifted to Lucerne in May

The World Economic Forum announced Wednesday that its postponed 2021 Davos summit, themed as "The Great Reset" in the coronavirus crisis, will take place in Lucerne, Switzerland from May 18 to 21.

Switzerland: 2021 Davos summit shifted to Lucerne in May
Participants at the World Economic Forum at Davos in 2020. Photo: FABRICE COFFRINI / AFP

The annual gathering of the world's political, economic and business elite traditionally takes place in January against the idyllic snowy backdrop of the Swiss Alpine village of Davos.

But it was postponed due to the Covid-19 pandemic and, charged with remodelling the world economy in the wake of the crisis, will now be held 125 kilometres (75 miles) away in the plush Burgenstock resort overlooking Lake Lucerne.

“The meeting will take place as long as all conditions are in place to guarantee the health and safety of participants and the host community,” WEF spokesman Adrian Monck said in a statement.

“The meeting will focus on the solutions required to address the world's most pressing challenges. “Global leaders will come together to design a common recovery path, to shape 'The Great Reset' in the post-Covid-19 era and rebuild a more cohesive and sustainable society.”

Hybrid format

The WEF announced in June that the 51st edition of its annual meeting would take place in a hybrid format, then in August said it was being delayed for several months to reduce any risks to participants from the coronavirus pandemic.

The Lucerne summit will combine both in-person and virtual elements, with participants linked to a network of around 400 hubs worldwide to incorporate dialogue with the WEF's “young global shapers, to ensure openness and inclusion”, said Monck.

The summit will be preceded during the week of January 25 by digitally-convened high-level “Davos Dialogues”, when global leaders will share their views on the state of the world in 2021.

The novel coronavirus has killed more than 1.04 million people while at least 35.5 million infections have been recorded since the outbreak emerged in China late last year, according to a tally from official sources compiled by AFP.

The pandemic has also triggered a global economic downturn, though the International Monetary Fund said Tuesday that while it is far from over, it will not be as bad as originally feared thanks to a flood of government spending.

The World Trade Organization said likewise, forecasting a global trade contraction of 9.2 percent this year, rather than its previous “optimistic scenario” prediction of 12.9 percent.

But global trade will then grow by only 7.2 percent next year, rather than the previous 21.3-percent estimate issued in April, the WTO added.

Swiss cases rising

The WEF announcement comes as Switzerland announced Wednesday that daily coronavirus cases had jumped over the 1,000-mark for the first time since April 1, when the peak of the pandemic's initial wave began to recede.

Swiss Health Minister Alain Berset has urged the country to “get a grip” and be more rigorous in applying the basic measures to control the spread of the virus.

The 2020 edition of the WEF summit, hosted in January just as the world was beginning to become aware of the new coronavirus spreading in China, drew more than 50 heads of state and government to Davos.

It focused on themes of sustainability and finding a more inclusive model for capitalism. US President Donald Trump and Swedish teenage eco-warrior Greta Thunberg were among its top speakers.

The WEF said it aims to be back in Davos for 2022.