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EU President says leaders committed to euro zone

Sep 5, 2011, 10:30 p.m.
European Commission President Jose Manuel Barroso addresses a news conference ahead of a Euro zone leaders summit in Brussels July 20, 2011. REUTERS/Thierry Roge

CANBERRA (Reuters) - The European Union's top official on Tuesday defended the political will of EU leaders to resolve the euro-zone debt crisis, despite concerns that they seem unable to halt a slide back into recession and avoid a fresh banking crisis.

EU Commission President Jose Manuel Barroso was speaking at a conference in Australia, the morning after investors sold off European markets, sending the euro lower and causing spreads on Italian and Spanish bond yields to surge.

"I believe we will solve it," Barroso said in a speech at the Australian National University in Canberra.

"A lot has been done and we are in the process of completing a very complex architecture. I can tell you very honestly I believe there is a strong determination of the leaders of the euro zone and the members states to support the financial stability of the euro zone and the euro," he added.

The EU, with the backing of the International Monetary Fund, have set up a 440 billion euro ($621 billion) stability fund to help weaker member countries, fight financial market contagion and prevent a crisis of confidence among banks.

However, markets have questioned the EU's resolve to see this plan through, with doubts over political support for it in Germany, Europe's biggest economy, and over the ability of major borrower Italy to implement an austerity package.

Barroso, in Australia for meetings with the government ahead of a Pacific Islands summit in New Zealand this week, said fiscal consolidation was Europe's most serious challenge.

He said the euro remained a stable and credible currency, and leaders would do whatever was needed to ensure financial stability in the euro zone.

"The euro remains an extremely important, credible, stable currency," he said.

"European leaders, the IMF, and countries providing most of the support will do whatever it takes, whatever is necessary, to keep financial stability in the euro zone."

Speaking later in Sydney, Barroso said there were no plans to create a single European credit rating agency despite a push from some politicians who say existing bodies are anti-European.

"We have no intention to create any kind of public rating agency. What we are trying to do is ... implement reforms that are needed and to reduce of course their (European nations') levels of debt," he said.

There has been a debate about the role of rating agencies in Europe, which were criticized for underestimating sovereign debt risks ahead of the 2008-2009 global financial crisis.

"Whether we agree or not with each one of the decisions of the rating agencies, one thing is sure: we have to reduce the deficits to ensure the sustainability of our public finances," Barroso told a business luncheon.

He said the European union remained committed to building relationships in Asia and the Pacific, and said Europe's crisis would not lead to a new round of introspection.

"Europe's future lies in adjusting its engagement and role in world affairs, not in internal squabbles," he said.

"To that end we are moving toward convincing medium and long-term approaches to both national budgets and euro zone governance, (with) the full impact of this progress becoming apparent over the next three years."

(Reporting by James Grubel; Additional reporting by Michael Smith in Sydney; Editing by Mark Bendeich)

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