Eurozone crisis is far from over - German Chancellor

by Dinesh Weerawansa reporting from Germany

BERLIN, Jan. 5. - German Chancellor Angela Merkel said the eurozone sovereign debt crisis is far from over even though reform measures designed to address the roots of the problem are beginning to bear fruit as retail sales in Germany increased as much as 2.1% last year.

She urged Germans to be more patient even though the eurozone crisis has already dragged on for three years. In a media interview, she drew a line linking German prosperity to a prosperous European Union" For our prosperity and our solidarity we need to strike the right balance," the German leader said, adding that the European sovereign debt crisis shows "how important this balance is".

"The reforms that we've introduced are beginning to have an impact," she said. "Nevertheless we need to have further continued patience.

The crisis is far from over." Merkel's comments indirectly contradicted her finance minister Wolfgang Schaeuble who earlier said the worst of the crisis was over.

Germany, which has been one of the strongest economies in Europe, has been the paymaster in the eurozone crisis, despite opposition by many German voters and a growing bloc of conservative lawmakers in her governing coalition.

Thought the Germans remain wary of eurozone bailout efforts, they have given full marks to Mrs Merkel for her judicious handling of the crisis. According to the Federal Statistical Office, retail sales in Germany rose as much as 2.1% last year as Europe's largest economy took the eurozone debt crisis in its stride. The November retail sales also gained from a year earlier, it added.

Germany has mainly escaped the worst effects of the crisis that has threatened to unravel the bloc. The latest figures showed that the unemployment rate has remained unchanged at 6.9% last month. The total jobless population remained around 2.8 million.

According to Germany's Federal Labour Agency, the seasonally-adjusted jobless rate was unchanged last month, although there were 3,000 more unemployed people than the previous month.

Germany is the architect and chief backer of the eurozone's many bailouts as the region tries to extricate itself from a debt crisis.

Unlike most of other partners of the 17-nation eurozone, Germany's economy grew for most of 2012. The fourth-quarter GDP figures are due this month.

The contraction of the eurozone's services sector since the summer of 2011 has slowed down in December, according to the latest monthly business survey.

Activity fell more slowly in countries such as Spain and Italy while it grew for the first time in five months in Germany.

The service-sector Purchasing Managers Index (PMI) for the eurozone as a whole rose to 47.8 last month from 46.7 in November. Levels below 50 imply shrinkage as services comprised the bulk of economic output in the eurozone. A strangled eurozone economy was experienced during the past 18 months, with southern European countries returning to recession, and even Germany showing signs of weakening in recent months.

The German Central Bank was forced to cut its growth forecast for 2013, saying the country might be entering a recession.

A latest survey disclosed that France was the only major eurozone economy where the service sector recession deepened in December, with the country's PMI reading falling to 45.2 from 45.8 in November.