Merkel Pleads for Patience to Let Europe Solve Its Problems DAVOS, SWITZERLAND - Chancellor Angela Merkel of Germany said Wednesday that Europe had made more progress in dealing with the sovereign debt crisis than foreign investors acknowledged, and she pleaded for patience while the Continent worked to become more competitive. "We are not going to resolve this with the wave of a magic wand," Mrs. Merkel told an audience at the World Economic Forum made up largely of businesspeople. In a speech that seemed designed to defuse criticism that Germany was bossing around the rest of Europe, Mrs. Merkel toned down her usual calls for budgetary austerity. Instead, she portrayed the crisis as ultimately a result of Europe's failure to become as dynamic as other regions. "What has also been very clear is that we have weaknesses as regards our competitiveness," she said. We would have had to acknowledge these weaknesses at some point, but now we really have to deal with this. Europe is serious about opening up its labor market and taking other steps to improve growth, she said, but because it is a democracy, progress may be slow. "Please take the long, drawn out practices with a degree of patience," Mrs. Merkel said. We will not become faint-hearted in pursuit of this project. At the same time, Mrs. Merkel complained that progress made in countries like Ireland or Spain had not been appreciated. "A lot more has been done than we have seen in the past," she said. "It's not only austerity measures," she said, "but also structural reforms that lead to more jobs." Mrs. Merkel spoke on the same day that economic data showed that Germany was performing better than expected, in contrast to Britain, which may be slipping further into recession. The Ifo Institute's index of the German business climate rose more than some economists predicted in January for a third month in a row, with manufacturing and service industries doing better than expected. Sales at carmakers like Daimler and Bayerische Motoren Werke jumped last year. The German data illustrated how companies in northern Europe had managed to at least partly insulate themselves from the debt crisis. "Business is doing better than governments," Pierre Nanterme, chief executive of the consulting firm Accenture, said during an interview in Davos. Large, global companies are less dependent on the European market, and in contrast to the financial crisis of 2008, they have had plenty of time to prepare for financial shocks, he said. "The situation is extremely different from 2008," Mr. Nanterme said. Min Zhu, the deputy managing director of the International Monetary Fund, said during an interview in Davos that Europe's sovereign debt crisis "remains serious" but that confidence was slowly being rebuilt in the region as political leaders erected firewalls around troubled countries and moved toward greater fiscal federalism. "It's becoming ever clearer that there is a way out if we work together," he said. I do see a light at the end of the tunnel. Still, Europe's troubles are far from over, and the risks remain on the downside, he said. For one, growth in Europe is virtually stagnant as governments continue to cut spending to reduce deficits and debts, Mr. Zhu said. "Austerity is hurting growth already," he said. We can't only look at cutting debt. We need to see growth. Greece remains mired in problems, and international creditors are hammering out a controversial solution to lower its heavy debt load. That situation "will take time to get back to normal," he said. And while investors have lowered the high interest rates they had been charging Italy and Spain, taking them out of a serious danger zone, a failure to stabilize the euro zone risks reversing that pattern, Mr. Zhu said. Meanwhile, if the Continent's fragile banks pull back on credit to the economy, it would hit growth prospects more broadly. "We've got to be very careful to stabilize Europe and the financial markets," he said. Bringing confidence back is so important. Many people at Davos remain deeply pessimistic. "That no one would drop out of the euro, or that the euro's troubles are over - it would be unwise and preposterous to take that view," Kenneth S. Rogoff, a professor at Harvard University and a former chief economist at the International Monetary Fund, said during an interview on the sidelines of the forum. Indeed, with Greece on the brink of a default, a number of business leaders, economists and policy makers predicted that a breakup of the euro zone was still in the cards, beginning with the exit of Greece and possibly moving toward other weak countries like Portugal. The billionaire George Soros went so far as to say that Greece might well be pushed from the euro zone this year. Mrs. Merkel was equally taken to task for having misdiagnosed the euro zone's woes and insisting on a debilitating program of austerity that most observers here fear would keep Europe's currency bloc in a state of near-stagnation for the better part of a decade. Gerard Lyons, global chief economist and group head of research at Standard Chartered bank, said at a luncheon that the E.M.U. - shorthand for the European Monetary Union - is now going to stand for "Even More Unemployment." Julia Werdigier contributed reporting from London.