Merkel Urges EU To Keep Up Reforms As Crisis Not Over

(Reuters) - German Chancellor Angela Merkel told parliament on Thursday that Europe must push ahead with efforts to cut public deficits and improve competitiveness because the euro zone debt crisis has not yet been overcome and its causes have not been eliminated.

Speaking to the background of nervousness in financial markets about signs of a global slowdown, Merkel said European Union leaders must bear in mind, as they debate ways to boost growth, that painful fiscal reforms have begun to pay off.

"Early successes prove that we chose the right path from the start," she said, citing improved productivity and finances in some euro zone states and what she termed the "successful" exit of Ireland, Portugal and Spain from their bailout programs.

"But - and I will say this again and again - we are still far from our goal," Merkel said.

"The crisis has not yet been permanently and sustainably overcome because the causes, regarding the set-up of the European economic and currency union and the situation of individual member states, haven't been eliminated."

"We have to press ahead determinedly with our efforts for sustainable growth and solid public finances and the creation of jobs," said Merkel, who is under pressure to allow member states such as France and Italy greater flexibility under EU deficit rules so that they can focus on measures to create employment.

But, like Finance Minister Wolfgang Schaeuble who has faced repeated criticisms of Berlin's stance at International Monetary Fund talks in Washington and from other EU finance ministers, the chancellor showed little sign of being swayed.

"All - and I stress here once again - all member states must fully respect the reinforced rules of the stability and growth pact," she said, adding that the incoming European Commission would have to uphold these rules to defend the EU's credibility.

Speaking ahead of an EU-Asia summit in Milan where she and other EU leaders will meet Russian President Vladimir Putin for the first time in months, with President Petro Poroshenko of Ukraine, Merkel called the situation there "very difficult".