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Germany: Central banks can't solve all problems

BERLIN Germany's finance minister said there are limits to what the world's central banks can do to solve economic problems and warned Thursday that there is too much money flooding global financial markets.

U.S. and Japanese authorities have already cut their interest rates to near zero. The European Central Bank this month cut its main rate to a record-low 0.5 percent, but companies in parts of Europe are still struggling to borrow at reasonable rates.

German Finance Minister Wolfgang Schaeuble argued that medium-sized companies' financing difficulties are a result of a wider crisis of confidence and said that even zero interest rates ultimately wouldn't help.

"Monetary policy can't solve the problems that have to be solved by financial and economic policy, structural policy," he said at a conference on Europe in Berlin, underlining Germany's insistence that structural reforms to countries' economies are key to resolving the crisis caused by too much government debt.

The ECB is doing its job well but can't be expected to do politicians' work, he added.

More broadly, Schaeuble said, "we have much too much liquidity from the world's central banks." He insisted that "when we have so much liquidity ... this is a placebo, we do not solve the problems."

Germany, Europe's biggest economy and the largest contributor to rescue packages for struggling countries in the 17-nation eurozone, has faced persistent criticism for favoring an austerity-heavy crisis response. Officials in Berlin continue to insist that has to be part of the answer.

The head of the European Union's executive Commission, Jose Manuel Barroso, offered some support, telling the conference that "we should keep a line of fiscal consolidation."

"Some deleveraging is necessary and it is completely irresponsible to suggest that some countries that are so vulnerable should now go for growth with stimulus programs for their economies," Barroso said by video link. "That would only increase ... the interest rates they pay, that would be a real problem for their growth."

Data released Wednesday showed that the eurozone contracted for the sixth straight quarter in the January-March period, its longest-ever recession, with nine of 17 member countries in recession.

Barroso said that "there will be probably a better situation at the end of the year."