News / Europe

Eurozone Leaders Try Again to Resolve Debt Crisis

German Chancellor Angela Merkel, left, addresses lawmakers on the decisions of the EU summit at the parliament Bundestag in Berlin, June 29, 2012.German Chancellor Angela Merkel, left, addresses lawmakers on the decisions of the EU summit at the parliament Bundestag in Berlin, June 29, 2012.
x
German Chancellor Angela Merkel, left, addresses lawmakers on the decisions of the EU summit at the parliament Bundestag in Berlin, June 29, 2012.
German Chancellor Angela Merkel, left, addresses lawmakers on the decisions of the EU summit at the parliament Bundestag in Berlin, June 29, 2012.
Ken Bredemeier
For more than two years, Europe's 17-nation euro currency bloc has grappled with containing its burgeoning governmental debt crisis. Its leaders often took half-steps they thought surely would calm international financial markets worried about the fate of the euro and solve the financial problems of the latest country that was strangled in debts of its own making.

And then the eurozone financial chieftains and heads of state would return to yet another summit weeks or months later and try to resolve the crisis once more when their earlier actions proved to be insufficient.

With that history in the books, Europe's leaders tried again in Brussels this week. This time, they took what some believe are more decisive measures to quell the immediate surge in borrowing costs for Italy and Spain, the eurozone's third and fourth largest economies. But they also set the currency bloc on a path toward a more unified monetary union, rather than just a collection of countries that happen to use the euro.

Stock markets across the world cheered Friday, with indexes up sharply. Interest rates on Italy's and Spain's bonds dropped from the levels that have forced Greece, Ireland and Portugal to secure international bailouts in the last two years.

Related video report by Henry Ridgwell
Europe's leaders applauded their collective actions, and in Washington, the White House said it welcomed the news as well. But whether it is enough to finally turn the corner on the crisis, no one was quite sure, what with numerous details to work out on defining just how centralized control of banking in the eurozone would work and what would be the shape of the "genuine monetary union" eurozone leaders said they want to create.

British Prime Minister David Cameron, whose country is outside the currency union but deeply affected by its economic performance, said he thought the steps taken are substantial, yet acknowledged that much more work is ahead.

"If you want a single currency to succeed you need institutions that absolutely stand behind it," said Cameron.  "In Britain you have the Bank of England standing behind the currency, doing what is necessary to safeguard the financial system, you need that in Europe too. I think last night was significant, but I have been to enough of these summits to know that Rome, Europe, none of these things was built in a day, there will be other steps that are required."

European leaders have heightened their calls for Germany, the eurozone's most potent economic force, to do more to help its economically weaker neighbors, but Merkel and her countrymen have been reluctant to take on the financial burdens of other countries that have not adhered to the financial restraints that Germany favors.

Cameron was sympathetic to his German counterpart's predicament.  

"Angela Merkel is being asked to do some things that are difficult for her to deliver," Cameron added.  "The German people have worked incredibly hard to make their economy competitive, to pay down their debts, to do all of the right things and it is all very difficult when they are then asked to do even more to support countries that might not have done all of those things."

In agreeing to the latest eurozone efforts, Merkel sought to assure Germans that she had not given into unfavorable commitments.

Spanish premier Mariano Rajoy voiced a note of uncertainty about the outcome, even while saying he thinks the summit's decisions will prove to be advantageous.

As for the details, the European leaders agreed to use the euro currency bloc's bailout fund to directly boost the continent's struggling banks, a move sought by Italy and Spain.

Under the new plan, the eurozone decided it could send loans to distressed banks directly, rather than through national governments, as has been the practice. The move was designed to keep the bank loans off the governments' mounting list of debts, such as a $125 billion rescue Spain is seeking for its banks, and make the financial institutions responsible for repaying their debts.

Borrowing costs for Italy and Spain, the 17-nation eurozone's third and fourth largest economies, had surged in recent days, especially for Madrid. But after the EU altered its lending plan, interest rates for Italian and Spanish bonds both dropped.

The EU summit also agreed to create a single supervisor to oversee the eurozone's banks by the end of 2012. Greater financial integration in the eurozone could eventually lead to tighter central control of spending by the 17 governments, which has been sought by Germany, and the sale of eurobonds, debt supported by the entire currency union.

Some European countries view the sale of eurobonds as a path to lower borrowing costs for weaker governments, but Berlin fears its low borrowing costs would increase.

The EU leaders also agreed to set aside about $150 billion to stimulate growth in the bloc's weakest economies.  The so-called "growth pact" was initially rejected by Spain and Italy, who held out until they won agreement on their demands.

French President Francois Hollande concluded that the summit's actions would prove successful both in the short term and in the future.

You May Like

Obama: Alaskans Feel Signs of Climate Change

They're seeing bigger storm surges as sea ice melts, more wildfires, erosion of glaciers, shorelines More

Katrina Brought Enduring Changes to New Orleans

The city’s recovery is the result of the people and culture the city is famous for, as well as newcomers and start-up industries More

Magical Photo Slides Show Native Americans in Late 1800s

Walter McClintock spent 20 years photographing the Blackfoot Indians and their vanishing culture at the dawn of the modern age More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Colombians Flee Venezuela as Border Crisis Escalatesi
X
August 27, 2015 2:08 AM
Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Is China's Economic Data Accurate?

Some investors say China's wild stock market gyrations have been made worse by worries about the reliability of that nation's economic data. And some critics say the reports can mislead investors by painting an unrealistically-strong picture of the economy. A key China scholar says Beijing is not fudging ((manipulating)) the numbers, but that the economy is evolving quickly from smoke-stack industries to services, and the ways of tracking new economic activity are falling behind the change. V
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Shipping Containers Provide Experimental Housing

Housing prices around the San Francisco Bay area are out of reach for many people, so some young entrepreneurs, artists and tech industry workers are creating their own houses using converted shipping containers. But as VOA's Mike O’Sullivan reports from Oakland, the effort requires ingenuity and dealing with restrictive local laws.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video Technique May Eliminate Drill-and-Fill Dental Care

Many people dread visiting dentists because they're afraid of drills. Now, however, a technology developed by a British firm promises to eliminate the need for mechanical cleaning of dental cavities by speeding a natural process of tooth repair. VOA’s George Putic reports.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.
Video

Video French Experiment in Integrating Roma Under Threat

Plans to destroy France’s oldest slum have sparked an outcry on the part of its Roma residents. As Lisa Bryant reports from the Paris suburb of La Courneuve, rights groups argue the community is a fledgling experiment on integrating Roma who are often outcasts in many parts of Europe.
Video

Video Kenyans Turn to Agriculture for Business

Each year Kenyan universities continue to churn out graduates for the job market despite the already existing high rate of unemployment among youth in the country. Some of these young men and women have realized that agriculture can be as rewarding as any other business or job, and they are resorting to agribusiness in large numbers as a way of tackling unemployment. Rael Ombuor reports for VOA.
Video

Video First Women Graduate Elite Army Ranger School

Two women are making history for the U.S. Army by proving they are among the toughest of the tough. VOA's Carla Babb reports from Fort Benning, Georgia as 94 men and those two women rise as graduates of the difficult Ranger school.

VOA Blogs