Japan Finance Chief: Europe Pledges ‘Speedy’ Debt Action

Posted June 5th, 2012 at 1:35 pm (UTC-5)
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Japan's finance chief says his European counterparts have pledged to take quick action to quell the deepening debt crisis in the 17-nation euro currency union.

Financial officials from the Group of Seven world-leading economies conferred in a special conference call Tuesday about the plight of debt-ridden eurozone nations. Afterwards, Japanese Finance Minister Jun Azumi told reporters in Tokyo that the European representatives said they would “speed up their efforts” to resolve the crisis that threatens to slow world economic expansion.

The finance chiefs issued no joint statement and it was not immediately clear what new action Europe might take to ease rising borrowing costs for the eurozone's financially weakest governments or boost the currency bloc's stagnant economy. Aside from Azumi, the conference call included budget officials from the U.S., Britain, France, Germany, Italy and Canada.

Their talks came as Spanish Treasury Minister Cristobal Montoro said high interest rates have effectively pushed Madrid out of international financial markets. He called on Spain's European neighbors to help rescue Spain's faltering banks, the first time the Spanish government has made a direct appeal for outside assistance.

The European Union and the International Monetary Fund said Portugal's surging unemployment rate is raising new concern about the austerity plan the country implemented in exchange for a $97 billion international bailout last year. The government is predicting that its jobless rate could increase to 16 percent next year, and analysts say Lisbon may, like Greece, need a second bailout.

Meanwhile, the Standard & Poor's credit rating service said late Monday there is “at least” a one-in-three chance that financially troubled Greece will exit the eurozone in the coming months. S&P said that after Greek elections June 17, the country could become the first to leave the eurozone if Athens rejects financial reforms demanded by its international creditors.

The World Bank says in a report the fallout from the eurozone crisis is also affecting neighboring countries.

The Washington-based international lender said the economies in six southeastern European nations — Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro and Serbia — are “slowing drastically” because of diminished eurozone economic growth. The World Bank pegged growth in the six countries at 1.1 percent this year — half that of last year.

Tuesday's G7 conference call was held ahead of the G-20 summit later this month in Los Cabos, Mexico, which will bring together the world's 20 leading economies.

Several European leaders have said they support use of the eurozone rescue funds to directly assist failing banks throughout the currency union. But Germany has rejected such calls, saying that individual governments should make the bailout requests, as is the case now, with spending conditions attached to the loans.

One German investment analyst, Robert Halver of Baader Bank, said the eurozone crisis seems unending, but could be eased if the European Central Bank invested heavily in Italy and Spain to give them time to boost their economies.

“History is repeating itself, we are again in full crisis mode. Last year: crisis; this year: crisis. The politicians have learned nothing. It would be so easy though. The ECB should massively interfere (intervene) and buy time for countries like Italy and Spain so that they can pursue reforms. Nobody can bear this cacophony, this waiting, this riding out any more.”

For many in Spain, like out-of-work Madrid resident Ada Adon, finding work has proved difficult in the country with the eurozone's highest unemployment rate.

“It is really hard in Spain to get a job right now because there are no jobs, and if somewhere you might have a chance, they do not want to pay what is more or less normal. Plus, everything is so expensive: supermarkets, food…. Everything is really difficult now.”