Chancellor Angela Merkel has underlined Germany's insistence that austerity is part of the solution to Europe's financial crisis but emphasized that reforms to make labor laws more flexible and encourage private investment also are essential.

Calls are mounting across Europe for Berlin to relent on an austerity drive that's become increasingly unpopular in other countries.

Merkel told a business conference Friday that there's much talk in Europe of growth "but sometimes the understanding is that there can only be growth when the state invests." She said that normally private investment drives growth.

Merkel argued that reforming Europe "is not just a question of austerity, as it's called today." Seeing through other economic reforms is also necessary, she said.