European Commission president Jose Manuel Barroso today said he still expects modest growth in Europe and does not anticipate a recession in Europe.
Concerns the euro zone debt crisis could spread to Italy and Spain have kept investors jittery, along with concerns that a new aid tranche for Greece could be on hold over fears the country will miss its budget deficit target this year.
"We don't anticipate a recession for Europe. The latest forecasts by the European Commission show that there would be growth, modest growth, that's true," Mr Barroso told reporters during a visit to Australia's parliament.
He said euro zone policymakers and officials were doing everything possible to ease economic concerns in the bloc, from tackling underlying budget problems to strengthening the governance of the euro-zone and bringing in tighter financial regulation and improving competitiveness.
"I want to be very clear here. The European Union and the euro are strong and resilient," he said, after talks with Australian prime minister Julia Gillard, whose country is a member of the Group of 20 leading and emerging economies.
Mr Barroso said it was too early to asses whether Greece would meet its commitments to cut the country's €340 billion debt, but the Greek government had said it planned to comply with its commitments.
"We are in contact with the Greek government and just now they have made some important remarks saying that they will comply with their commitments. This is certainly very important for Greece. It is also important for the EU," he said.
Elsewhere, ECB president Jean-Claude Trichet today urged euro zone states to immediately approve the strengthening of the EFSF bailout fund decided in July to combat the debt crisis, amid signs some were dragging their heels.
Mr Trichet also said governments were only half-way through the reforms needed to strengthen the fragile financial sector and called for stronger governance in the euro zone, including the possibility of a central override on decision-making by countries who fail to stick to budgetary rules.
Yesterday, the head of a junior government party in Slovakia said parliament would not vote until December at the earliest on the strengthening of the €440 billion EFSF euro zone joint rescue fund agreed in July, much later than the early October deadline euro zone officials are targetting.
"It is clear ... that we have an absolute and total need for all of the decisions to be implemented immediately as was decided...by the different heads of state and government," Mr Trichet said at a conference in Paris.
Mr Trichet said that a volley of structural economic reforms were needed in the euro zone to improve productivity and increase growth and employment potential.
With the euro zone bearing the brunt of a global debt crisis, he said there was a consensus that the single currency zone needed a substantial strengthening of its Stability and Growth Pact, which governs member states' fiscal behaviour.
"One can imagine that tomorrow, going further than what is currently foreseen, if despite recommendations a country doesn't take or is incapable of taking the required decisions, it should be possible to take them from the centre, from the centre of the single currency," Mr Trichet said.
"One can imagine a federal government."
He said a more centralised economic government in the euro zone should have responsibility for the banking system, allowing the financial sector to decouple from sovereign risks.
Bank of Italy Governor Mario Draghi, who is to take over form Mr Trichet at the ECB in November, today also warned any delay risked worsening the euro zone's debt crisis.
Mr Draghi emphasised that the ECB's sovereign bond buying programme - which has bought breathing space in debt markets for peripheral states such as Italy and Spain in recent weeks - was a temporary measure and no substitute for fiscal reforms.
Reuters
