German chancellor Angela Merkel questioned today whether an increase in the euro zone's rescue funds would reassure markets and said Europe has already lost a lot of confidence by failing to deliver on its promises.
"Now they say... 'it should be twice as big'," she said in a speech at the annual World Economic Forum meeting in Davos, referring to calls on her to back increases in euro zone rescue funds.
"'If it were twice as big, we'd believe you'. Some say 'it should even be three times as big, then we'd really believe you.' And I always ask myself how long is that credible and when is that no longer credible.
"What we don't want (in Germany) is a situation in which we promise something we can't back up in the end because if Germany... promises something that can't be kept if markets attack it hard, then Europe is really vulnerable."
Dr Merkel added that a lot of confidence has already been lost.
"Confidence has been lost because one said 'they've promised something that they didn't deliver on'," she said. "Confidence is the most important currency that one can have worldwide at the moment."
She appealed to business leaders to give policy makers the space they need to tackle the debt crisis, pledging that Europe will pull together and restore confidence.
"I would like to ask all of you who are here as the representatives of the business community" to recognize how democratic governments work and to "please take the long-drawn- out processes with a degree of acceptance," she said in a question-and-answer session after opening the forum.
Dr Merkel's comments underscore her shift in approach to taming the debt crisis now in its third year, having ditched rhetoric about conducting a "battle" between markets and politicians.
"Europe will become more attractive once we have conquered this crisis, and I'm absolutely convinced that we will be able to master this crisis," she added. European leaders will discuss measures to raise competitiveness and create growth and jobs at their January 30 summit and again in March, she added.
Taoiseach Enda Kenny is speaking at the event this evening. He is laying out Ireland's stall before political leaders, financiers and executives, to show them Ireland is not only open for business but is making considerable progress with its EU-IMF programme and is more competitive than in recent memory.
Following a prominent Irish absence last year, Mr Kenny can rely on the support of Davos veterans Archbishop Diarmuid Martin and Peter Sutherland, the Goldman Sachs International chairman and former EU commissioner.
