The European Union has the tools and will to protect the euro and fight the bloc’s sovereign debt crisis, European Council President Herman Van Rompuy and European Union President Jose Barroso said.
For now, the EU is “determined to stay the course” and continue its efforts to cut deficits across the 27-nation union, while also honoring commitments made to Greece, Van Rompuy told reporters yesterday before the Group of Eight summit. At the same time, he defended the EU’s ability to take further actions as necessary.
“We will do whatever needed to guarantee the financial stability of the euro zone,” Van Rompuy said, speaking at Camp David, the presidential retreat outside Washington.
The European leaders will need to reassure their G-8 counterparts that they are doing enough to contain financial turmoil that has spread from Greece to Ireland, Portugal and Spain. Almost $4 trillion was wiped from global equity markets this month amid speculation that Greece will exit the euro, and recession and loan losses led Moody’s Investors Services May 17 to downgrade 16 Spanish banks.
The G-8 includes the U.S., Canada, the U.K., Germany, France, Italy, Japan and Russia. The EU also has two seats. Barroso said the euro area has consistently taken whatever actions are needed to deal with the crisis, overhauling its economic governance and changing course when necessary.
“Sometimes these efforts are underestimated,” he said at the Camp David news conference. For example, he said, the euro area created the 500 billion-euro ($639 billion) European Stability Mechanism, a rescue fund that is due to start in July, as part of the bloc’s financial firewall.
“That was completely unthinkable two years ago, and it was done in the middle of the crisis,” Barroso said.
EU leaders will press forward on efforts to jump-start economic growth at a May 23 dinner in Brussels, followed by a formal summit in June. Barroso said the group aims to move ahead with proposals to strengthen the European Investment Bank and to make investments to spur job creation.
“Plan A” is for Greece to stay in the euro zone, Barroso said, declining to discuss planning around other scenarios. At the same time, the leaders said Greek authorities need to keep meeting the EU’s aid conditions as they seek to form a government.
“As regards Greece, I do not hide my concern about the current political uncertainty,” Van Rompuy said. “Continued reform is the best guarantee for the Greek economy and for the future of the Greek people in the euro area.”
Van Rompuy said that Spain and Italy are making progress on efforts to shore up their economies. “I am confident they will succeed,” he said.
The EU leaders also will talk with President Barack Obama about whether there will be any need to tap strategic petroleum reserves to combat potential spikes in oil prices. The subject is being discussed as the U.S. and its allies prepare for the imposition of an EU embargo on Iranian oil that’s set to begin July 1.
Crude oil for June delivery fell $1.08 to $91.48 a barrel on the New York Mercantile Exchange, the lowest settlement since Oct. 26. Prices retreated 4.8 percent this week, and are down 7.4 percent this year.
“If there is a major risk, we are supporting the idea that something can be done,” Barroso said. “If there are high and volatile prices of oil, they could have a negative impact on the economic prospects globally.”