Key European leaders pledged at a meeting with U.S. President Barack Obama Monday that they will push for closer economic integration of the 17-nation Eurozone to help resolve the continent’s burgeoning debt crisis.
European Council President Herman Van Rompuy and European Commission President José Manuel Barroso called for uniform, binding controls over government spending in the countries that use the euro currency. Van Rompuy said a roadmap spelling out a new Eurozone economic plan would be presented to a European Union summit in early December.
Barroso, speaking after a White House summit in Washington with President Obama, said European leaders “are determined to overcome the current difficulties.” Debt-ridden Greece, Ireland and and Portugal have already been forced to secure international bailouts, while Italy, Spain and other countries are facing sharply increased borrowing costs to finance their governments.
Obama said the U.S. is prepared “to do our part” to help Europe solve its debt crisis, which he described as being “of huge importance to our economy.” But he did not spell out any specific actions the United States might take.
A new report says the Eurozone’s economy is falling into a recession.
The Organization for Economic Cooperation and Development said it expects the Eurozone economy will shrink by an annualized rate of 1 percent in the last three months of the year, and by another four-tenths of 1 percent in the first quarter of 2012. The organization, a policy forum for 34 advanced economies, said the European Central Bank needs to intervene decisively to stabilize the continent’s debt crisis.
White House spokesman Jay Carney said the European debt crisis has “created a headwind for much of the year” on the sluggish U.S. economy. He said the U.S. government believes it is critical for European leaders to move forcefully to resolve the debt issue and that the eurozone nations have the financial capacity to deal with it.
As debt worries in Italy, Spain and elsewhere roil international financial markets, the continent’s economic leaders – Germany and France – are starting to negotiate a new fiscal agreement that would enforce budget discipline across the Eurozone. That is something individual countries have long resisted, as they fear the loss of sovereign control.
The effects of the debt crisis have been widespread. Belgium was forced to pay sharply higher interest rates on Monday, while the Italian Banking Association promoted a patriotic drive to get Italians to buy government bonds to try to keep interest rates from spiraling out of control.
Credit rating agency Moody’s warned in a statement Monday that while it believes there will not be widespread defaults in the eurozone, the probability of multiple debt defaults is no longer negligible.