Germany, France press for coercive euro zone debt rules
By Stephen Brown and Jan Strupczewski
BERLIN/BRUSSELS (Reuters) - Germany and France stepped up a drive on Monday for coercive powers to reject euro zone members' budgets that breach EU rules, and the United States kept up the drumbeat of demands from the rest of the world for decisive action.
The OECD rich nations' economic think-tank said the European Central Bank should cut interest rates and abandon its reluctance to step up purchases of government bonds in order to restore confidence in the euro area, which now posed the main risk to the world economy.
The ECB shows no sign of doing so yet. It bought 8.5 billion euros of euro zone government debt in the latest week, at a time of acute turmoil, in line with its previous activity but well short of what economists say is necessary to turn market sentiment around.
President Barack Obama said the European crisis was a "huge issue" for the U.S. economy after meeting top European officials Herman Van Rompuy and Jose Manuel Barroso in Washington.
White House spokesman Jay Carney said Obama's message behind closed doors was that "Europe needs to take decisive action, conclusive action to handle this problem, and that it has the capacity to do so."
In Brussels, finance ministers of the 17-nation currency area meeting on Tuesday are due to approve detailed arrangements for scaling up the European Financial Stability Facility rescue fund to help prevent contagion in bond markets, and release a vital aid lifeline for Greece.
The signs are the EFSF may not have enough clout, leaving the onus firmly on the ECB. Sources have said the Obama administration has urged Europe to allow the ECB to act as lender of last resort as the U.S. Federal Reserve does.
Berlin and Paris aim to outline proposals for a fiscal union before a European Union summit on December 9 increasingly seen by investors as possibly the last chance to avert a breakdown of the single currency area. Continued...