Barroso urges eurozone countries to tackle root causes of debt crisis

07:35, May 12, 2010      

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Eurozone countries should make additional efforts to tackle the root cause of a spreading Greek debt crisis, European Commission President Jose Manuel Barroso said on Tuesday.

"It is not just about giving money, its about asking members states or the eurozone to make additional efforts for the correction of some unbalances that still exist," Barroso told reporters Tuesday in Brussels, referring to a 750-billion-euro ( 952-billion-dollar) rescue mechanism crafted by European Union (EU) finance ministers one day earlier.

The ministers agreed Monday on the unprecedented rescue mechanism in a desperate bid to prevent spreading of the Greek debt crisis to other indebted eurozone countries like Spain and Portugal.

The 750-billion-euro package, designed as a safety net for eurozone countries, would include 440 billion euros in loan guarantees by eurozone governments, 60 billion euros from the EU budget and 250 billion euros from the International Monetary Fund (IMF).

Markets saluted the deal and soared on Monday, but they lost some ground on Tuesday due to concerns over the effectiveness of the rescue mechanism and a worsening economic outlook for Europe amid the debt crisis.

Marek Belka, director of European department of the IMF, warned that the rescue package may calm the markets in the short term, but it was not a long-term solution.

"The European countries amassed resources to provide emergency financing for those who need, but it is only a shot of drug to stabilize the patient and real treatment has to come," Belka said at a panel discussion at the 2010 World Economic Forum on Europe held here on Monday.

He said longer term problems have to be solved, such as fiscal sustainability and growing divergence in the euro zone.

The commission has been pushing for better economic coordination in the euro zone so as to redress macroeconomic imbalances in the single currency club.

Countries with large current account surplus, notably Germany, were urged to consume and import more, while Greece and other indebted eurozone members, which have been in the red for years, needed to improve their economic competitiveness.

Source: Xinhua


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