Germany's Merkel says no need to loosen euro budget rules after her deputy signals flexibility

BERLIN – German Chancellor Angela Merkel is making clear she won’t back changes to the 18-nation eurozone’s budget deficit rules after her deputy signalled greater flexibility.

Vice Chancellor Sigmar Gabriel, who criticized Germany’s austerity-led approach before his party joined Merkel in government in December, suggested in France this week that countries committing to reforms could get more time to reduce budget deficits.

Some interpreted that as a call to loosen rules requiring that deficits be kept below 3 per cent of gross domestic product, which could benefit countries such as France or Italy.

Merkel said she and Gabriel agreed Wednesday that “there is no need to change the stability pact,” as the budget rules are called. She said it already contains “everything we need in terms of flexibility to overcome the problems.”