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Rebecca Christie
May 20, 2012

U.S. President Barack Obama (C) listens as French President Francois Hollande speaks following their bilateral meeting in the Oval Office of the White House in Washington May 18, 2012. Hollande is in the United States to join other leaders of the major industrial economies and meet for a G8 Summit at Camp David this weekend to try to head off a full-blown financial crisis in Europe.‘Extraordinary importance’ … the US President, Barack Obama, listens to his French counterpart, Francois Hollande. Photo: Reuters

The European Union has the tools and the will to protect the euro and fight the bloc’s sovereign debt crisis, the European Council President, Herman Van Rompuy, and European Union President, Jose Barroso, declared yesterday.

For now, the EU is ”determined to stay the course” and continue its efforts to cut deficits across the 27-nation union, while also honouring commitments made to Greece, Mr Van Rompuy said yesterday before attending the Group of Eight summit in the US.

He defended the EU’s ability to take further action as necessary.

”We will do whatever needed to guarantee the financial stability of the eurozone,” Mr Van Rompuy said, speaking at Camp David, the presidential retreat outside Washington.

The European leaders will need to reassure their G8 counterparts that they are doing enough to contain financial turmoil that has spread from Greece to Ireland, Portugal and Spain. Almost $US4 trillion was wiped from global equity markets this month amid speculation that Greece would exit the euro, and recession and loan losses led Moody’s Investors Services to downgrade 16 Spanish banks last week.

The G8 includes the US, Canada, Britain, Germany, France, Italy, Japan and Russia. The EU also has two seats.

Mr Barroso said the eurozone had taken whatever actions were needed to deal with the crisis, overhauling its economic governance and changing course when necessary.

”Sometimes these efforts are underestimated,” he said at the Camp David news conference.

For example, he said, the euro area created the €500 billion ($645 billion) European Stability Mechanism, a rescue fund that is due to start in July, as part of the bloc’s financial firewall. ”That was completely unthinkable two years ago, and it was done in the middle of the crisis,” Mr Barroso said.

EU leaders will press forward on efforts to stimulate economic growth at a May 23 dinner in Brussels, followed by a formal summit in June. Mr Barroso said the group aimed to move ahead with proposals to strengthen the European Investment Bank and to make investments to spur job creation.

”Plan A” was for Greece to stay in the eurozone, Mr Barroso said. At the same time, the leaders said Greek authorities need to keep meeting the EU’s aid conditions as they seek to form a government.

”As regards Greece, I do not hide my concern about the current political uncertainty,” Mr Van Rompuy said. ”Continued reform is the best guarantee for the Greek economy and for the future of the Greek people in the euro area.”

He said that Spain and Italy are making progress on efforts to shore up their economies.

”I am confident they will succeed,” he said.

Greece will go the polls on June 17.

The EU leaders will also talk to the US President, Barack Obama, about whether there will be any need to tap strategic petroleum reserves to combat potential spikes in oil prices. The subject is being discussed as the US and its allies prepare for the imposition of an EU embargo on Iranian oil from July 1.

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