UPDATE 1-Merkel says euro zone has bought itself time

* Euro zone must consolidate budgets to secure euro – Merkel

* Germany focused on budget consolidation, not tax relief

(Adds detail, background)

By Paul Carrel

BERLIN, July 2 (BestGrowthStock) – Euro zone countries have bought
themselves time to deal with the currency area’s debt crisis and
must now consolidate their public finances to secure the euro’s
future, German Chancellor Angela Merkel said on Friday.

Asked whether the euro zone crisis had abated, Merkel said a
bailout for Greece and a safety net for the broader euro zone
had relieved the immediate pressure.

“We’ve bought time for ourselves,” she told RTL television
in an interview.

After initial reluctance, Germany earlier this year agreed
with its euro zone peers and the International Monetary Fund to
the bailout for Greece. Berlin has since agreed to a 750 billion
euro financial safety net.

Countries must now consolidate their budgets, Merkel said.

“This work must now be done over several years so that we
can say ‘the euro is secured for the long-term’,” she added.

Merkel told RTL that reducing taxes for middle income wage
earners was not a priority for her government at the moment —
even though the Free Democrat coalition partners are pressing
for such tax cuts.

“It’s not a priority,” she said.

She said that the government would take a closer look at
value-added tax levels after the summer recess. “We’ll look at
the VAT rates in the autumn,” she said.

Merkel said she was pleased that public support for budget
consolidation appeared to be rising, based on opinion polls.

“The first thing now is consolidation and I’m pleased to see
that the people are supporting that aim more and more,” she
said.

Merkel unveiled plans last month for 80 billion euros in
budget cuts over the next four years — a package she hopes will
bring Germany’s structural deficit within European Union limits
by 2013. [ID:nLDE6561E9]

However, some members of her ruling coalition want the
government to tone down the budget cut plans after party rebels
forced a humiliating vote over the presidency this week.
(Additional reporting by Erik Kirschbaum, editing by Mike
Peacock)

UPDATE 1-Merkel says euro zone has bought itself time