European Leaders Pledge To Save Euro At G20
Euro leaders are set to unveil fresh efforts to save the single currency, after pledging at the G20 to bring down dangerously high government borrowing costs.
The world leaders meeting in Los Cabos, Mexico, for the annual G20 summit said they would take action to drive down government bond yields across the euro area.
US President Barack Obama expressed his relief at Europe's "heightened" urgency saying: "Over the last two days, European leaders here in Cabos have made it clear that they understand the stakes and they pledged to take the actions needed to address this crisis and restore confidence, stability and growth."
The move came after Spanish bond yields - the key measure of how cheaply the country can borrow on capital markets - hit their highest level since the creation of the euro.
The expectation is that, within days, the euro area will pledge to activate a scheme whereby its 750bn euro (£604bn) bailout funds - the EFSF (European Financial Stability Facility) and ESM (European Stability Mechanism) - buy up bonds of the most troubled euro area economies.
The move is regarded by some as being a first step towards a fiscal union across the currency area, and represents a shift in attitude from the Germans, who had resisted taking such action until recently.
It comes after two days of talks among the world leaders and increasing pressure from non-EU nations, including the US and China, to tackle the crisis before it sends the world economy into a tailspin.
Although the EFSF and ESM already have legal powers to buy bonds, they have not done so yet - leaving this to the European Central Bank.
But Italian Prime Minister Mario Monti is reported to have pressured for this scheme to be activated given his and Spain's borrowing costs are regarded as having hit unsustainable levels.
Although the issue is addressed only in passing in the communique, more detail is expected to be revealed on the action in the coming days and weeks.
British Chancellor George Osborne told Sky News: "I think the eurozone can do things to try and bring those bond spreads, those really high borrowing costs, down in various countries.
"They can do more things to transfer resources from richer parts of the eurozone to poorer parts of the eurozone, and stand behind the weaker banks in the eurozone.
"We've been urging them for a year and they are inching towards a solution but I don't think there is a single country in the world who wouldn't wish it would happen a bit quicker and get some stability in the world economy."
The G20's final communique did not mention such policies explicitly, but did name check the ESM and indicate that it would do whatever possible to bring down those elevated bond yields - including imposing new borrowing rules.
It said: "The adoption of the Fiscal Compact and its ongoing implementation, together with growth-enhancing policies and structural reform and financial stability measures, are important steps towards greater fiscal and economic integration that lead to sustainable borrowing costs.
"The imminent establishment of the European Stability Mechanism is a substantial strengthening of the European firewalls. We fully support the actions of the Euro Area in moving forward with the completion of the Economic and Monetary Union."
Attention will now be focused on the European leaders, who meet for another summit in Brussels next week.
what do you think?
take a good look at all those leaders and know that they are all corrupt to the core and most of the worlds problems today are because of these people and their predecessors.
The only corrupt leaders I see are our own!
Ronald George Halliday
More Talks, More Problems, No Solutions. Financiers Win throughout all these delays.
Anyone holding their breath?
Throwing more good money after bad! The Euro was a hopeless and illconceived political construct as no single currency and interest rates could suit such widely divergent economies, but the rules were ignored to tie as many countries into the Euro as possible. The only winner is Germany as if the poorer nations were to be allowed to leave the Euro, their own currencies would, for the next five years or so, be so weak that German exports would be unaffordable. If anyone is to pump money in to saving the Euro - it must be Germany. Not a penny of British taxpayers' money should be spent on this. We have already bailed out Ireland, largely because we are their main trading partner.
You are right David. I just everybody else could see it.
The single currency was only an adjunct of the Free Trade Area the then Common Market used to be just a step further along the line to accommodate the 'free movement' of business and business import taxes, so, in that sense, the EU is a bosses' club. It also introduced the 'free movement' of people so Europeans were free to travel, live and work in other countries where needed or desired. But, with the ebbs and flows of boom and bust capitalism, this system was always going to fail. However, if Europe was run on a genuinely democratic socialist basis, we could have had a United Socialist States of Europe and those weaker economies would have been properly invested in and we would have all grown the more stronger for it. Capitalism is a failed system but will not leave the stage voluntarily, only mass movements that become more organised and link up across the continent, will be able to finally consign the anarchy of the markets to the 'dustbin of history' where they belong.
For once you've posted something I entirely agree with!
THE SOONER THE EURO CRASHES COMPLETELY THE BETTER. YES IT WILL CAUSE A LOT OF PROBLEMS FOR ALL COUNTRIES. TO ME THE ONLY ONE THAT IS SEEMING TO BENIFIT FROM THE EURO AND THE EXCHANGE RATE IS ......GERMANY...... MAYBE THATS WHY THEY ARE PUSHING SO MUCH TO DEFEND IT.