Barroso calls on eurozone countries to step up reforms

Commission president says eurozone countries must show resolve on market fears.

José Manuel Barroso, the European Commission president, has urged member states to step up the implementation of decisions to expand the scope of the EU’s bail-out fund in response to growing market concerns over Italy and Spain.

Barroso made the appeal today in the wake of fresh concerns of contagion on financial markets after yields of Spanish and Italian sovereign bonds reached new highs on Tuesday (2 August).

‘Unwarranted’  fears

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He said the developments in the market were “a cause of deep concern” but said they were “clearly unwarranted” because the two countries had already taken measures to rein in budget deficits and debt.

Barroso said it was “essential” that eurozone member states “move forward rapidly” to implement decisions taken at the 21 July summit of eurozone leaders. He said that quick implementation would “send an unambiguous signal of the euro area’s resolve to address the sovereign-debt crisis with the means commensurate with the gravity of the situation”.

The Commission president said the bond market moves reflected growing worries among investors over the capacity of the eurozone to respond to the debt crisis which has already led to the bail-outs of Greece, Ireland and Portugal.

At the summit, the leaders agreed to expand the powers of the European Financial Stablity Facility (EFSF) to buy bonds on the secondary market, recapitalise banks and to give precautionary credit lines. This decision is part of a wider package of measures agreed to at the talks, which included a second bail-out plan for Greece and a commitment to bolster the eurozone’s crisis management. Parts of the package will have to be approved by national parliaments.

‘Matter of urgency’

Barroso said that technical work, currently under way by experts, should be completed “as a matter of urgency” so that eurozone member states can ratify them as quickly as possible.

Barroso spoke by telephone to José Luis Rodriguez Zapatero, Spain’s prime minister, on Tuesday (2 August) to discuss the market situation.

Olli Rehn, the European commissioner for economic and monetary affairs, spoke to Giulio Tremonti, Italy’s finance minister, earlier today by telephone, Commission officials said. Tremonti updated Rehn on measures Italy is taking to implement budget cuts and structural reforms. Tremonti also held talks with Jean-Claude Juncker, Luxembourg’s prime minister and the president of the Eurogroup, in Luxembourg.

Rehn said in a statement that he “remains convinced … Italian authorities are doing what is necessary to put the country back on track for higher sustainable growth and ensuring fiscal consolidation”.