The euro zone’s leaders need to show markets they are taking responsibility for its debt crisis and work out how to tally monetary union with budget policy, Spanish press reported US President Barack Obama as saying.
Greece is the immediate concern, but an even bigger problem is what may happen should markets take another run at the larger economies of Spain and Italy, the EFE news agency reported Obama as telling journalists in Washington.
“It is difficult to co-ordinate and agree a common path when you have so many countries with different policies and economic situations,” Obama said, according to the report on the El Mundo newspaper website.
“In the end the big countries in Europe, the leaders in Europe must meet and take a decision on how to coordinate monetary integration with more effective co-ordinated fiscal policy,” the EFE Spanish-language report quoted Obama as saying.
US Treasury Secretary Timothy Geithner is due to make an unprecedented one-day trip to Poland this week to meet with euro zone finance ministers as fears grow that Greece will soon default on its debt.
Weakness in the global economy will continue so long as the euro zone crisis is not resolved, Obama said.
Greece is “the biggest immediate concern,” the report quoted Obama as saying, but the biggest problem will be “what will happen in Spain and Italy if the markets keep attacking these very big countries.”
Meanwhile, German Chancellor Angela Merkel sought on Tuesday to quash talk of an imminent Greek default.
Merkel said in a radio interview that Europe was doing everything in its power to avoid a Greek default and urged politicians in her own coalition to weigh their words carefully to avoid creating turmoil on financial markets.
Asked by RBB inforadio whether a Greek default would doom the euro, she answered: “We are using all the tools we have to prevent this. We need to avoid all disorderly processes with regards to the euro.”
Merkel added that everything must be done to keep the euro zone intact "because we would see domino effects very quickly.”
Markets have already priced in the near certainty of a Greek debt default. Credit default swap prices suggest a 90% probability of default in the next five years, according to CDS pricing data provider Markit.