EU Calling for More Unity in Debt Crisis

Posted September 28th, 2011 at 9:46 am (UTC-5)
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The European Union is calling for more unity to deal with the continent’s debt crisis, even as economic power Germany heads to a key vote on how much to help financially troubled countries.

European Commission President Jose Manuel Barroso said Wednesday the debt crisis is a test of Europe’s ability to respond to a challenge. He said “more integration and more discipline” is needed among the 17 nations that use the euro currency. He predicted that debt-plagued Greece would remain in the euro bloc even as it struggles to carry out austerity measures aimed at cutting the country’s massive debt.

Barroso’s comments came as German lawmakers prepared for a contentious Thursday vote on increasing the continent’s bailout fund to $593 billion, a figure agreed to by European leaders more than two months ago. Finland agreed to the increase on Wednesday, leaving seven other countries yet to ratify it.

German Chancellor Angela Merkel faces opposition within her center-right coalition to approving the new funding amount. But some financial experts are saying even the new size of the fund is too small. They say the fund needs several trillion dollars, to deal with Greece’s debt woes, and possible bailouts that may be needed by Italy and Spain.

Financial auditors from the EU, the International Monetary Fund and European Central Bank are headed back to Athens on Thursday to continue their examination of Greece’s politically unpopular moves to cut spending and raise taxes in order to trim country’s debt. The inspectors will help decide whether Greece is living up to the terms of its bailout last year and should receive another $11 billion portion of the international assistance.

The Greek Parliament approved a controversial new property tax Tuesday. The tax is the latest Greek government effort to satisfy its creditors and show a commitment to cutting the national debt. Greece is attempting to obtain the new round of financial aid in October to avoid a government default.

Greek Prime Minister George Papandreou told German business leaders that he can “guarantee” that Greece will live up to its financial commitments made to its creditors. Mr. Papandreou predicted that his country will emerge from the current debt crisis and return to growth and prosperity.

As part of his European unity call, Barroso proposed a new financial transactions tax throughout the 27-nation EU that could raise nearly $78 billion annually. Over the last three years, the EU has provided nearly $6.3 trillion in financial assistance to European governments.

Additionally, he called for the sale of eurobonds, which would allow debt sharing in the eurozone. But that is a controversial idea for financially strong countries like Germany and the Netherlands, where opposition has grown against further financial support for debt-ridden governments. Some say that Greece and other financially troubled nations have been irresponsible in managing their spending and now should not look to other countries for help.