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Merkel says Greece has chance to overcome crisis: paper

PRAGUE (Reuters) - Greece has gone a long way on the path of reforms and now stands a chance to overcome its debt crisis but still faces many tough measures, German Chancellor Angela Merkel said in a newspaper interview to be published on Saturday.

Merkel told Czech daily Lidove Noviny she wants Greece to stay in the euro zone, and that she was optimistic other euro zone countries would meet their pledges to cut budget deficits.

"It (debt restructuring) has been done in a reasonable way and Greece now has a chance. I do not want to make anything look prettier than it is: Greece still has a tough path ahead, but it has gone a long way," Merkel said in the interview, conducted earlier this week.

"I do not see a reasonable alternative to this path of solid budget, administrative reforms, reforms of the labor market, liberalization of closed professions and above all, more efficient tax collection."

Asked whether the euro zone's fiscal compact, budget rules signed by 25 of 27 EU countries earlier this month, was not already threatened by slippage by some member states, Merkel said:

"Netherlands is still working on its budget. Spain is promising that in 2013 it will strive to meet the 3 percent limit, but it is pointing out higher deficit that it inherited from the previous government.

"It has pledged now how to get close to the 3 percent. I am optimistic... everybody will meet their commitments."

Merkel said it was a mistake that Europe had not moved more quickly to a political union when adopting the euro.

She said it would still take long before Europe has a common fiscal policy, but steps such as the fiscal compact were going in that direction.

"Now it is necessary to set binding debt limits and stick to the agreed parameters - such as a certain level of spending on research and development," she said.

"On top of that, we need to agree on more general targets, for example to lower unemployment among the youth and raise the level of employment. Every member state will put together its own budget, but it has to stick to certain boundaries and set certain priorities."

(Reporting by Jan Lopatka)

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