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Big two 'committed to eurozone'

The leaders of Germany and France have added their weight to the battle to preserve the European single currency with a joint statement promising to do everything they can to stop the 17-country bloc from breaking up.

The statement from chancellor Angela Merkel and president Francois Hollande was brief and did not spell out any specific course of action, but it offered a show of unity by the leaders of the eurozone's two biggest economies.

"Germany and France are deeply committed to the integrity of the eurozone," the two leaders said in their statement. "They are determined to do everything to protect the eurozone." To achieve that, they added, eurozone members and European institutions "must comply with their obligations, each in their own area of competence".

The statement, made after a telephone conversation between the two leaders today, came a day after Mario Draghi, president of the European Central Bank, told business leaders in London that the ECB would do "whatever it takes" to preserve the euro and raised expectations that he could step in to lower the high borrowing costs that are crippling countries like Spain and Italy.

Concerns about the 17 countries that use the euro have intensified over the past few weeks as evidence builds that economies across the region face deepening recessions.

Spain and Italy, in particular, are finding it increasingly expensive to raise money on the debt markets due to spiralling borrowing costs. Investors are losing confidence that the countries will be able to control their debt while they are in recession. Fears have also resurfaced that bailed-out Greece might be forced out of the single currency if it fails to carry out reforms that were a condition of its financial rescue.

Ms Merkel and Mr Hollande underlined the need to "implement quickly" decisions made by a European Union summit last month. Those decisions included allowing Europe's bailout fund - once a new, independent bank supervisor is set up - to give money directly to a country's banks, rather than via the government.

Countries that pledge to implement reforms demanded by the European Commission would be able to tap rescue funds without having to go through the kind of tough austerity measures demanded of Greece, Portugal and Ireland.

European finance ministers last week signed a rescue package worth up to 100 billion euros (£78 billion) for Spain's ailing banks, but concern flared about Spain's prolonged recession and the debts of its regions, causing the country's borrowing costs to rise.

Ms Merkel and Mr Hollande made no specific reference to the ECB's role in helping solve the crisis, but Germany's finance minister welcomed the remarks Mr Draghi made. The comments have raised expectations that the ECB could step in to lower high borrowing costs - possibly by buying government bonds.


From Belfast Telegraph