The euro zone faces a systemic crisis that will need a stronger commitment from all countries to resolve and a fragmented currency union is no solution , European Commission President Jose Manuel Barroso said today.
The 17-nation bloc has entered what may be a critical phase of the two-year-long sovereign debt crisis with France, the region's second largest economy, now the target of intense bond market pressure, with its borrowing costs soaring dramatically.
Barroso said no euro zone nation was immune from market attacks and the bloc had to act with strength and decisiveness to show investors it could handle the crisis.
"We are indeed now facing a truly systemic crisis that requires an even stronger commitment from all and that may require additional and very important measures," Barroso told the European Parliament in Strasbourg.
"We will not make the euro stronger through the fragmentation of the European Union," he said.
Barroso said there needed to be deeper economic integration among euro zone members that did not put the remaining 10 members of the European Union at a disadvantage.
"Reinforcing the governance of the euro is also reinforcing our union," Barroso said. "There should not be any divide between the current 17 member states on one side and 10 on the other. Most of them, almost all of them, have a vocation to join the euro."
Despite resistance from non-euro zone member states such as Britain, Barroso said changes to the EU's rulebooks would be needed to ensure a deeper union. He called for more solidarity, but acknowledged that changing the EU treaty was no way out of the immediate debt debacle and would take time.
"In the future, we will need to go even further on strengthening integration. And this will require Treaty changes," Barroso said.
He said new measures to tighten surveillance of the budgets of euro zone countries and their economic targets would come into force as early as next month.
Barroso also warned that a two-year economic recovery had run out of steam, echoing other senior European officials, and said growth would be low at best while unemployment would remain at around 10% for the next two years.
The euro zone's economy grew just 0.2% in the third quarter from the second, the EU said yesterday, and economists say the bloc is almost certainly heading for a recession. "Our challenges are of a great magnitude," he said.
Obama 'deeply concerned' at Europe market turmoil
US President Barack Obama said today he was "deeply concerned" at the turmoil in the euro zone amid ongoing concerns about Europe's debt crisis and anaemic growth.
"I am deeply concerned and I have been deeply concerned. I suspect I will be deeply concerned tomorrow and next week," he said at a press conference during a visit to Australia.
Obama spoke amid new fears about stability in the euro zone which has been hammered by a public debt crisis that has spooked global markets. Just over a week after he huddled with European leaders at the G20 summit in Cannes, France, Obama said that the problem in Europe was one of "political will" to fix the fiscal turmoil that has threatened to plunge the world economy into recession.
"Until we put in place a concrete plan and structure that sends a clear signal to the markets that Europe is standing behind the euro and will do what it takes, we are going to continue to see the kinds of turmoil that we saw in the markets," Obama said.
He acknowledged a genuine desire on the part of German Chancellor Angela Merkel and French President Nicolas Sarkozy to solve the crisis, but warned the continent suffered from a complicated political structure.
"At this point, the larger European community has to stand behind the European project," Obama said. "We have got an integrated world economy and what happens in Europe will have an impact on us," he added.
