Eurozone needs coordinated policies: Merkel

(HANOVER) - Eurozone nations must coordinate economic policies more closely, German Chancellor Angela Merkel said Monday, acknowledging that the common currency, the euro, was in a challenging phase.

"We agreed that we must have stronger coordination of our economic policies," Merkel said after talks with Spanish Prime Minister Jose Luis Rodriguez Zapatero, whose country currently heads the European Union.

She added that sticking to the EU's fiscal rules was "of great importance at the moment," adding that the euro "is in a very challenging phase."

Under the EU's Stability and Growth Pact, countries are supposed to keep their budget deficits under three percent of Gross Domestic Product (GDP) and total, accumulated debt under 60 percent.

The euro, shared by 16 countries in the European Union, has come under great pressure as markets lose confidence in the currency due to problems in Greece, whose public deficit is more than four times over the 3.0 percent limit.

"I have made clear ... that Greece must implement what the Greek government has already announced," Merkel said.

"I want us to look at this together," added Merkel, who will hold talks with Greek Prime Minister George Papandreou in Berlin on Friday.

Earlier Monday, the EU's top budget enforcer urged Greece to act fast with new steps on its deficit.

Visiting Athens, Economic and Monetary Affairs Commissioner Olli Rehn said Greece should "announce additional measures in the coming days" to bring about a drastic reduction in its deficit, which is the highest in the eurozone.

Austerity measures already announced by the government -- including tax rises and public sector benefit cuts -- have sparked anger among many ordinary Greeks.

However, despite the current difficulties with the euro, Merkel said all countries had gained from membership of the eurozone.

"I am convinced that all countries have profited from being in the euro .... This is a common currency and we have all gained from it."

For his part, Zapatero said: "We are perfectly convinced that the difficulties that we currently have in one country ... namely Greece, are solvable."

The two were speaking ahead of their opening speeches at CeBIT, the world's largest high-tech fair, which this year welcomes Spain as its partner country.

Merkel used her opening speech to stress that while new technology had made the world smaller, it had also increased the risk of contagion, as the financial crisis had shown.

And she warned: "There is still the danger looming of hidden protectionism after the global economic crisis. It is not a thing of the past yet.

"It is important that we do have free trade so that progress can be spread without barriers," added the chancellor.