The leaders of the European Union are crafting a second plan this weekend that will see all members pledge to cut deficits with “great speed” in an effort to stop the spread of the Greek debt crisis.
German Chancellor Angela Merkel, who is among the most influential E.U. leaders, outlined the plan Saturday following a bilateral meeting with Prime Minister Stephen Harper.
The night before, Ms. Merkel was in Brussels with her E.U. counterparts where they assigned their respective finance ministers to craft a financial plan that is in addition to the $140-billion (U.S.) rescue package already pledged jointly with the International Monetary Fund.
The drop in markets throughout the past week fuelled speculation that the package would not be enough to stop Europe’s debt troubles from ultimately triggering a double dip global recession.
The IMF, which meets Sunday to approve its share of the bailout, had stated Friday that the plan is sufficient and that the nervous reaction from stock markets is overdone.
That had also been the E.U.’s position up until Friday night, but clearly the situation has changed.
“Yesterday at the meeting of the heads of governments of the Euro group we took a key step beyond that program because we believe the security of the Euro zone as a whole is not guaranteed with this program alone,” said Ms. Merkel.
“This is why we decided upon three measures. The first of which is that all members of the Eurozone have to reduce their deficit with determination and great speed. Secondly we need a strict regulation of the financial markets that includes the European markets... and a third point, we will undertake a joint effort, that is to say develop a joint instrument, a European instrument, that will help us respond to threats to the Euro zone not only affecting one country but a response that allows us to act together in order to make it clear that we stand together by the stability of our currency.”
Ms. Merkel, who is joining other world leaders in Moscow Sunday to take part in events marking the 65th anniversary of the end of the Second World War, said she will be in close contact with her officials throughout the weekend as they work out the details.
The bilateral meeting is the last stop on Mr. Harper’s tour of Europe, which included meetings in Brussels Wednesday with the heads of the European Union, events in Netherlands marking the 65th anniversary of that nation’s liberation during the Second World War and a visit to the Croatian capital of Zagreb.
Mr. Harper said he is confident that “our European friends” will take the measures required. Canada is hosting the G20 in late June and he repeated his view that the situation in Europe means the summit should focus on phasing out deficit-spending measures originally launched to stimulate the economy.
“I don’t think we should forget the primary crisis here, the fundamental crisis, is not in the financial sector. It is in the finances of certain governments,” he said. “It’s important for all countries to understand that high levels of deficit and debt cannot continue indefinitely and in some countries they are very high and that issue does have to be tackled and it has to be tackled not just in Europe but across the globe.”
