Leaders seek solutions to eurozone debt crisis at Davos

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VietnamNet English - 73 month(s) ago 4 readings

The Davos Annual Meeting draws conclusion on Monday, with eurozone debt crisis being the focal point throughout the five-day process and leaders not only from Europe but all across the world striving to seek solutions to the issue.


Not unexpectedly, German Chancellor Angela Merkel, leader of eurozone's backbone country, took the advantage of Davos, to restate her firm commitment to resolve the pressing debt issue.

Speaking at the opening ceremony of the Annual Meeting which gathered some 2600 participants from over 100 countries, Merkel stressed that Europe needs restructuring and jobs creation as concrete approaches towards economic recovery and sustainability.

"Do we dare more Europe?" she asked. From her point of view, although some regulations have been put in place to regulate the systematically important big banks from further destabilized the financial system, there are still many issues left to be tackled, such as tightening budget discipline and making sure financial stability.

The public debt problem facing many European countries, Merkel said, can not be cured by waving magic wand.

The German Chancellor went on to say that Europe's economic future, in the long run, relies on jobs creation, in particular for the younger generation, and reforms and deregulation in labor market. She said the issue of job creation will be in focus at the EU Brussels Summit due on Jan. 30.

She also calls a restructuring of the EU political system, which she said clearly lack of political strength that makes this system work.


Unlike most of the continental EU members, who have time and again committed themselves to defend the European single currency, Merkel's counterpart, British Prime Minister David Cameron did not seem to be optimistic with the outlook.

Speaking at a session on the second day of the Annual Meeting, Cameron responded to Merkel's speech with certain doubt over whether the eurozone has all the institutional elements needed to support the euro.

He also refused to support the Financial Transactions Tax, which he said could cost the EU 200 billion euros in GDP and could take out almost 500,000 jobs.

Despite the British and Germany leadership does not share the same view over which route to lead Europe out of the crisis, they are indeed on the same boat sailing towards the same destination - helping the EU to get back on its feet through regaining competitiveness.

To that end, Cameron said, the EU must take bold actions to get rid of regulatory burdens.

"Europe's lack of competitiveness is its Achilles heel," Cameron said, given that "Lisbon strategy has failed to deliver the structural reforms that we need."

To fix that, the British Prime Minister said the EU needs to take actions which includes putting all proposed EU measures under test on their impact on growth before put them in use, setting a target to reduce the overall burden of EU regulation, introducing a new proportionality test, to prevent needless barriers to trade and services and slashing the number of regulated professions in Europe.


Europe's move seems to be a bit slow from outside point of view, but indeed, they are making progress.

The first quarter of 2012 would have been an "extraordinarily taxing quarter" for the debt-laden Union, but according what the President of the European Central Bank Mario Draghi revealed at Davos, through a long list of measures taken by the EU, "we know for sure that we have avoided a major credit crunch, a major funding crisis."

Draghi said that 230 billion euros of bank bonds would come in due during this quarter, on top of the "staggering" refinancing needs of some EU countries, but ECB has managed to pump the same amount of money into the financial system, and saved financial institutions form default.

At the same time, progress was also observed at the epicenter of this crisis, Greece, as a deal on private sector involvement between the Greek government and the private creditor community was about to be closed.

"We are very close, and we have to have a sustainable solution for Greece," said Olli Rehn, Vice-President of the Economic and Monetary Affairs, European Commission.

His voice was echoed by German Finance Minister Wolfgang Schaeuble.

"I don't expect the default of Greece," Schaeuble said. "I am sure that if everybody is ready to deliver what has been agreed, and all the parties of Greece are ready to do it, we will avoid - we can avoid and we will avoid - a default of Greece," he added.


Eurozone's stability is not only a matter vital to the EU, across the Atlantic, the United States also has its stake in it.

In Davos, U.S. Treasury Secretary Timothy Geithner offered his recommendations. In his opinion, the only way for Europe to be successful in holding things and making the monetary union work over the long run, "is for them to build a stronger firewall as a complement to the rest of the comprehensive strategy they have."

That of course requires a bigger commitment of resources -- something which Geithner believes the International Monetary Fund (IMF) can play a supportive and constructive role.

And indeed, that is exactly what the Fund and Managing Director Christine Lagarde was thinking about.

"No one is immune in the current situation," said Largarde, noting that "it's not just the eurozone crisis; it's crisis that could have collateral effects, spillover effects around the world.

"The Europeans have to help themselves even more than they have so far," she said.


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