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

Turbulent Transition Imperils Tunisia’s Arab Spring Gains

Critics say new anti-terrorism laws worsen Tunisia's situation while others put faith in country’s vibrant civil organizations, women’s movement More

Burundi’s Political Crisis May Become Humanitarian One

United Nations aid agencies issue warning as deadly violence sends tens of thousands fleeing More

Yemenis Adjust to Life Under Houthi Rule

Locals want warring parties to strike deal to stop bloodletting before deciding how country is governed More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Texas Town Residents Told to 'Just Leave' Ahead of Flood Threati
X
Greg Flakus
May 29, 2015 11:24 PM
Water from heavy rain in eastern and central Texas is now swelling rivers that flow into the Gulf of Mexico, threatening towns along their banks. VOA’s Greg Flakus visited the town of Wharton, southwest of Houston, where the Colorado River is close to cresting.
Video

Video Texas Town Residents Told to 'Just Leave' Ahead of Flood Threat

Water from heavy rain in eastern and central Texas is now swelling rivers that flow into the Gulf of Mexico, threatening towns along their banks. VOA’s Greg Flakus visited the town of Wharton, southwest of Houston, where the Colorado River is close to cresting.
Video

Video New York's One World Trade Center Observatory Opens to Public

From New Jersey to Long Island, from Northern suburbs to the Atlantic Ocean, with all of New York City in-between.  That view became available to the public Friday as the One World Trade Center Observatory opened in New York -- atop the replacement for the buildings destroyed in the September 11, 2001, attacks.  VOA’s Bernard Shusman reports.
Video

Video Seoul Sponsors Korean Unification Fair

With inter-Korean relations deteriorating over the North’s nuclear program, past military provocations and human rights abuses, many Koreans still hold out hope for eventual peaceful re-unification. VOA’s Brian Padden visited a “unification fair” held this week in Seoul, where border communities promoted the benefits of increased cooperation.
Video

Video Purple Door Coffeeshop: Changing Lives One Cup at a Time

For a quarter of his life, Kevin Persons lived on the street. Today, he is working behind the counter of an espresso bar, serving coffee and working to transition off the streets and into a home. Paul Vargas reports for VOA.
Video

Video Modular Robot Getting Closer to Reality

A robot being developed at Carnegie Mellon University has evolved into a multi-legged modular mechanical snake, able to move over rugged surfaces and explore the surroundings. Scientists say such machines could someday help in search and rescue operations. VOA’s George Putic reports.
Video

Video Shanghai Hosts Big Consumer Electronics Show

Electronic gadgets are a huge success in China, judging by the first Asian Consumer Electronics Show, held this week in Shanghai. Over the course of two days, more than 20,000 visitors watched, tested and played with useful and some less-useful electronic devices exhibited by about 200 manufacturers. VOA’s George Putic has more.
Video

Video Forced to Return Home, Afghan Refugees Face Increased Hardship

Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Britain Makes Controversial Move to Crack Down on Extremism

Britain is moving to tighten controls on extremist rhetoric, even when it does not incite violence or hatred -- a move that some are concerned might unduly restrict basic freedoms. It is an issue many countries are grappling with as extremist groups gain power in the Middle East, fueled in part by donations and fighters from the West. VOA’s Al Pessin reports from London.
Video

Video 3D Printer Makes Replica of Iconic Sports Car

Cars with parts made by 3D printers are already on the road, but engineers are still learning about this new technology. While testing the possibility of printing an entire car, researchers at the U.S. Department of Energy recently created an electric-powered replica of an iconic sports roadster. VOA’s George Putic has more.
Video

Video Al-Shabab Recruitment Drive Still on In Kenya

The al-Shabab militants that have long battled for control of Somalia also have recruited thousands of young people in Kenya, leaving many families disconsolate. Mohammed Yusuf recently visited the Kenyan town of Isiolo, and met with relatives of those recruited, as well as a many who have helped with the recruiting.
Video

Video A Small Oasis on Kabul's Outskirts Provides Relief From Security Tensions

When people in Kabul want to get away from the city and relax, many choose Qargha Lake, a small resort on the outskirts of Kabul. Ayesha Tanzeem visited and talked with people about the precious oasis.
Video

Video Kenyans Lament Losing Sons to al-Shabab

There is agony, fear and lost hope in the Kenyan town of Isiolo, a key target of a new al-Shabab recruitment drive. VOA's Mohammed Yusuf visits Isiolo to speak with families and at least one man who says he was a recruiter.
Video

Video Scientists Say Plankton More Important Than Previously Thought

Tiny ocean creatures called plankton are mostly thought of as food for whales and other large marine animals, but a four-year global study discovered, among other things, that plankton are a major source of oxygen on our planet. VOA’s George Putic reports.
Video

Video Kenya’s Capital Sees Rise in Shisha Parlors

In Kenya, the smoking of shisha, a type of flavored tobacco, is the latest craze. Patrons are flocking to shisha parlors to smoke and socialize. But the practice can be addictive and harmful, though many dabblers may not realize the dangers, according to a new review. Lenny Ruvaga has more on the story for VOA from Nairobi, Kenya.

VOA Blogs