Crisis 'resolvable'in medium term

"The world economy is at a critical juncture. In Europe, we have to continue to make progress in strengthening policies and institutions. We must continue in our efforts to strengthen the economic fundamentals of our economies and advance with fiscal and structural reform," he told business leaders attending a talk at the residence of the German ambassador on Tuesday evening.

He expressed confidence that the difficulties in the euro zone could be overcome in the medium term, and that Greece would remain part of the European Union’s currency area.

"The term ‘euro-crisis’ is convenient, but misleading. In its first 10 years, the common currency has been remarkably successful by [any] standard," the ambassador said.

He said the euro exchange rate and the inflation rate across the currency area were as stable as that of the Deutsche Mark, the former German currency unit.

The euro has assumed the role of a second global reserve currency, and Germany has benefited tremendously from its existence, he added.

Asked about the proposal to introduce eurobonds to rescue troubled euro-zone members, Schulze said such a move would not be the right remedy. He reasoned that instruments agreed upon by member states were already available, for example the European Financial Stability Facility, and that the EU should resort to them first.

Questioned on a possible EU policy shift from austerity programmes to a growth strategy, he said Germany believed that fiscal responsibility by member states must be addressed first.

Germany continues to serve as an important anchor for growth and stability in the euro zone. Last year, German real gross domestic product grew by 3 per cent, and domestic demand, based on earlier structural reforms, made a significantly higher contribution to growth than net exports, he said.

However, he acknowledged that as an export nation, Germany would be adversely affected by the euro-zone crisis and the weakening global economic recovery.

Speaking on condition of anonymity, one German investor told The Nation that Greece should leave the euro zone, as German taxpayers were unlikely to be willing to bear the burden of an endless rescue package for the debt-stricken country.

Germany’s share of EU exports to Thailand is about 30 per cent, making it the European bloc’s most important trade partner of the Kingdom.

Annual trade between the two countries increased last year and now stands at US$10 billion (Bt314 billion), representing 13-per-cent growth year on year. Direct investment in Thailand by German firms is about $2.9 billion.

Meanwhile, Finance Minister Kittiratt Na-Ranong told German business leaders that Thailand wanted to participate in the government procurement pact reached |by some members of the World Trade Organisation, since the Thai government believes this will partly address the problem of corruption.

"The government has not decided whether to be become an observer first, or a member." He added that some Thai authorities suggested the government should apply for observer status before becoming a full member of the agreement.

Kittiratt also expressed optimism about the prospects of a free-trade agreement between Thailand and the EU.