The head of the European Commission today warned that the debt crisis posed the biggest challenge to the EU in its history as Greece made a last-gasp pitch to secure vital bail-out funds.
As a team of international auditors prepared to descend on the Greek capital to determine whether Athens had made enough economic reforms to earn another €8 billion in loans, fresh falls on European markets highlighted a general scepticism about whether the crisis could be tamed.
In a speech to the European Parliament, Jose Manuel Barroso, president of the European Commission, insisted it was "possible" and "vital" to overcome the crisis.
"We are today faced with the greatest challenge our Union has known in all its history", he said in his annual "state of the union" to the parliament.
Barroso came out clearly in favour of the controversial creation of eurobonds, which would enable the pooling of debt between members of the 17 nations sharing the euro.
"Once the euro area is fully equipped with the instruments necessary to ensure both integration and discipline, the issuance of joint debt will be seen as a natural and advantageous step for all," he said.
The 17-nation single currency area is sharply divided over eurobonds. Belgium and Luxembourg, as well as states in financial trouble, such as Greece, favour their creation as the most effective and durable way to resolve the euro zone debt crisis.
But Germany, which enjoys the euro zone's lowest funding rates, opposes them, saying they would take the pressure off profligate governments to get their finances in order by providing cheaper cash than they could raise on their own.
German lawmakers are due to vote tomorrow expanding the scope and size of the EU's current rescue fund - the European Financial Stability Facility (EFSF) - which has already helped bail out Ireland and Portugal.
Parliament in Finland, another country where there is deep-rooted reluctance to bailing out euro zone strugglers, today approved the increase in the EU bail-out fund.
Barroso proposes financial transactions tax
European Commission President Jose Manuel Barroso today called for a financial transactions tax, saying the financial services sector must "make a contribution".
"Today the Commission adopted a proposal for the Financial Transaction Tax. Today I am putting before you a very important legislative text," Barroso said in a speech to the European Parliament.
In his annual "state of the union" address, Barroso said that over the last three years, members of the 27-nation bloc had granted aid and provided guarantees of €4.6 trillion to the financial sector in the aftermath of the 2008 global crisis. "It is time for the financial sector to make a contribution back to society," he said.
The tax is opposed both by the US and by some countries within the EU, notably Britain which is home to some of the most important financial markets in the world.
On the commission's drawing-board for more than a year, the tax idea was given fresh impetus last month when given the nod by Europe's power couple, French President Nicolas Sarkozy and German Chancellor Angela Merkel.
If adopted - not before 2014 - the tax could bring in between €30 billion and €50 billion a year.
Greece will remain in the euro zone
Greece will remain in the euro zone but must meet its reform commitments in full, the head of the European Commission, Jose Manuel Barroso, said today.
In an annual address to the European parliament, Barroso countered persistent talk of Athens leaving the 17-nation euro zone, saying: "Greece is, and will remain, a member of the euro area."
But "Greece must implement its commitments in full and on time," he stressed, pledging also that Europe would not let Athens down.
"In turn, the other euro area members have pledged to support Greece and each other," he said.
