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

    Video Twists and Turns Aplenty in US Presidential Race

    Even as Americans pause for this week’s Memorial Day holiday, much attention is focused on the presidential contest

    China's Education Reforms Spark Protest

    Beijing is putting a quota system in place to increase the number of students from poor regions attending universities

    The Struggle With Painkillers: Treating Pain Without Feeding Addiction

    'Wonder drug' pain medications have turned out to be major problem: not only do they run high risk of addicting the user, but they can actually make patients' chronic pain worse, US CDC says

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Chinese-Americans Heart Trump, Bucking National Trendi
    X
    May 27, 2016 5:57 AM
    A new study conducted by three Asian-American organizations shows there are three times as many Democrats as there are Republicans among Asian-American voters, and they favor Hillary Clinton over Donald Trump. But one group, called Chinese-Americans For Trump, is going against the tide and strongly supports the business tycoon. VOA’s Elizabeth Lee caught up with them at a Trump rally and reports from Anaheim, California.
    Video

    Video Chinese-Americans Heart Trump, Bucking National Trend

    A new study conducted by three Asian-American organizations shows there are three times as many Democrats as there are Republicans among Asian-American voters, and they favor Hillary Clinton over Donald Trump. But one group, called Chinese-Americans For Trump, is going against the tide and strongly supports the business tycoon. VOA’s Elizabeth Lee caught up with them at a Trump rally and reports from Anaheim, California.
    Video

    Video Reactions to Trump's Success Polarized Abroad

    What seemed impossible less than a year ago is now almost a certainty. New York real estate mogul Donald Trump has won the number of delegates needed to secure the Republican presidential nomination. The prospect has sparked as much controversy abroad as it has in the United States. Zlatica Hoke has more.
    Video

    Video Drawings by Children in Hiroshima Show Hope and Peace

    On Friday, President Barack Obama will visit Hiroshima, Japan, the first American president to do so while in office. In August 1945, the United States dropped an atomic bomb on the city to force Japan's surrender in World War II. Although their city lay in ruins, some Hiroshima schoolchildren drew pictures of hope and peace. The former students and their drawings are now part of a documentary called “Pictures from a Hiroshima Schoolyard.” VOA's Deborah Block has the story.
    Video

    Video Vietnamese Rapper Performs for Obama

    A prominent young Vietnamese artist told President Obama said she faced roadblocks as a woman rapper, and asked the president about government support for the arts. He asked her to rap, and he even offered to provide a base beat for her. Watch what happened.
    Video

    Video Roots Run Deep for Tunisia's Dwindling Jewish Community

    This week, hundreds of Jewish pilgrims are defying terrorist threats to celebrate an ancient religious festival on the Tunisian island of Djerba. The festivities cast a spotlight on North Africa's once-vibrant Jewish population that has all but died out in recent decades. Despite rising threats of militant Islam and the country's battered economy, one of the Arab world's last Jewish communities is staying put and nurturing a new generation. VOA’s Lisa Bryant reports.
    Video

    Video Meet Your New Co-Worker: The Robot

    Increasing numbers of robots are joining the workforce, as companies scale back and more processes become automated. The latest robots are flexible and collaborative, built to work alongside humans as opposed to replacing them. VOA’s Tina Trinh looks at the next generation of automated employees helping out their human colleagues.
    Video

    Video Wheelchair Technology in Tune With Times

    Technologies for the disabled, including wheelchair technology, are advancing just as quickly as everything else in the digital age. Two new advances in wheelchairs offer improved control and a more comfortable fit. VOA's George Putic reports.
    Video

    Video Baby Boxes Offer Safe Haven for Unwanted Children

    No one knows exactly how many babies are abandoned worldwide each year. The statistic is a difficult one to determine because it is illegal in most places. Therefore unwanted babies are often hidden and left to die. But as Erika Celeste reports from Woodburn, Indiana, a new program hopes to make surrendering infants safer for everyone.
    Video

    Video California Celebration Showcases Local Wines, Balloons

    Communities in the U.S. often hold festivals to show what makes them special. In California, for example, farmers near Fresno celebrate their figs and those around Gilmore showcase their garlic. Mike O'Sullivan reports that the wine-producing region of Temecula offers local vintages in an annual festival where rides on hot-air balloons add to the excitement.
    Video

    Video US Elementary School Offers Living Science Lessons

    Zero is not a good score on a test at school. But Discovery Elementary is proud of its “net zero” rating. Net zero describes a building in which the amount of energy provided by on-site renewable sources equals the amount of energy the building uses. As Faiza Elmasry tells us, the innovative features in the building turn the school into a teaching tool, where kids can't help but learn about science and sustainability. Faith Lapidus narrates.

    Special Report

    Adrift The Invisible African Diaspora