Eurozone big four vow billions to boost growth

ROME — The leaders of the eurozone’s four biggest economies on Friday vowed measures to boost growth in the face of a relentless debt crisis, including an injection of up to 130 billion euros ($163 billion).

Meeting for talks in Rome ahead of a crucial EU summit in Brussels next week, the leaders of Germany, France, Italy and Spain looked to soothe global worries with promises to kickstart growth in the bloc’s floundering economies.

French President Francois Hollande said the leaders had agreed to mobilise “one percent of European GDP, that is 120 to 130 billion euros, to support growth” — a move Germany’s Angela Merkel hailed as “an important signal”.

“The lesson of this crisis is more Europe, not less Europe,” Merkel added during a press conference after the talks.

“We need to work closer together politically, especially in the eurozone. Whoever has a common currency must also have coherent policies. That is also a lesson from the last two years,” Merkel said.

Italian Prime Minister Mario Monti said the four leaders had agreed that boosting growth in the eurozone was key to restoring confidence.

“The first objective we agree on is to relaunch growth, investments and to create jobs,” Monti said.

“The euro is here to stay and we all mean it. The great project which has been successful until now, the euro, is irreversible,” he added.

In a sign of continued discord, however, Hollande said there could be “no transfer of sovereignty without greater solidarity” within the eurozone.

Giving up sovereignty would be required for deeper fiscal integration in the eurozone, which Merkel is pushing for, but France wants financial burden sharing to be a higher priority.

Merkel, who has led the drive for austerity measures aimed at setting weaker countries on a more solid financial foundation, made it clear that Berlin would not abandon its stance on fiscal prudence.

“I think the important message today is that growth and solid finances are two sides of the same coin. Solid finances are a precondition but are not sufficient if you don’t also create growth and jobs,” she said.

With the two-year-old crisis threatening to engulf Spain and Italy and weighing down the global economy, Europe’s leaders are under intense pressure to find solutions.

Monti had raised the stakes ahead of the talks, warning that failure to reach a deal at the EU summit would leave the bloc vulnerable to attack by financial market speculators.

“There would be progressively greater speculative attacks on individual countries, with harassment of the weaker countries,” he said in an interview with European newspapers including Britain’s Guardian and Italy’s La Stampa.

“To emerge in good shape from this crisis of the eurozone and the European economy, ever more integration is needed,” he said.

But a German government spokesman had poured cold water on hopes for a breakthrough before the talks, saying: “This is simply a visit, no decisions will be taken.”

Both Madrid and Rome have been hit by rocketing borrowing costs, despite a series of structural reform packages in Italy and a eurozone rescue loan in the works for Spain’s stricken banks.

Spanish Finance Minister Luis De Guindos said on Friday the country would formally request eurozone aid for its banks on Monday, after Madrid said they need up to 62 billion euros ($78 billion) to survive a severe financial slump.

“We will submit next Monday the letter with the formal request for aid,” he said after two days of talks with European counterparts in Luxembourg.

Friday’s talks in Rome had been expected to examine refocusing eurozone economic policy on growth rather than on austerity, with observers hoping Monti could act as a mediator between Paris and the bloc’s pay-master Germany.

Hollande had earlier proposed a 120-billion-euro “growth pact” for the eurozone that included funds previously approved for infrastructure projects, as well as a financial-transactions tax.

Ahead of next week’s EU summit, the four leaders also discussed broader efforts towards closer political integration, and the banking or financial union that economists see as essential to getting to the root of the debt crisis.

The United States, the International Monetary Fund and the European Central Bank have all urged greater banking integration in Europe, as the debt crisis bounces back and forth between the private financial sector and national treasuries.

“The euro area crisis has reached a critical stage,” the IMF said on Thursday. “Despite extraordinary policy actions, bank and sovereign markets in many parts of the euro area remain under acute stress, raising questions about the viability of the monetary union itself.”

Adding to the sense of urgency, the ratings agency Moody’s downgraded on Thursday the credit ratings of 15 of the world’s biggest banks, citing exposure risk and Europe’s economic woes.