Europe Urged to Keep Debt Crisis in Check

Officials around the world are now pressing European leaders to take swift action to keep Europe's debt crisis from spreading.

Worries about a possible Greek debt default and deepening Euro-zone debt woes have been on the rise, despite European policy makers' efforts to calm investors.

Liu Yan takes a closer look.

European leaders have been battling to get on top of the debt crisis for more than 18 months.

In July, the leaders strengthened their 440-billion euro bailout fund by allowing it to lend pre-emptively to governments in distress and buy bonds in the secondary market.

But the decisions have not yet been fully implemented, undermining confidence in the ability of the euro zone to tackle the problems.

Responding to market worries about the Euro-zone crisis, European Commission President Jose Manuel Barroso proposed to issue joint bonds to tackle the crisis.

The so-called Euro-bonds would allow member states to borrow money collectively.

But the idea is openly opposed by German economy minister Phillip Roesler.

"Mister Barroso does not speak for the German government. I want to point out that we just had a verdict of the Supreme Court of Germany which made clear that a limitless liability of Germany is not possible without the approval of the German parliament. In my view that eliminates eurobonds for Germany."

The mixed signals from European leaders have escalated concerns that the 17-nation euro zone may be unable to unite behind a common approach to tackle the crisis.

US Treasury secretary Timothy Geithner says European governments need to use "overwhelming force" to address the financial woes.

Geithner's push comes as US banks have lined up billions of dollars in financing for European lenders.

Meanwhile, World Bank President Robert Zoellick also added his weight to the pressure for Europe to make hard decisions.

"The global economy has entered a new danger zone with little running room as European countries resist difficult truths about the common responsibilities of a common currency."

In China, Premier Wen Jiabao has said the world's second largest economy is willing to help debt-burdened Europe by increasing its investment.

But Li Daokui, an adviser of the Monetary Policy Committee of China's central bank, says it's imperative for Europe to restructure its public finance.

"What we want to see is clear commitment and the pragmatic policy packages to restructure their public finance and welfare systems and restructure their economies. So this (is) number one thing, I think, China and all other countries can communicate to the European countries is that we need to see pragmatic, tangible and the firm commitment to reform."
European leaders have indeed shown their willingness to control their debt problems.

The leaders of Germany and France have assured that Greece is an "integral part of the eurozone" amid speculation of a Greek debt default.

Greece has also said it's committed to meeting all the deficit reductions plans it agreed to in exchange for its two bailouts.

In addition, Italy's parliament approved an austerity package, aiming to reduce Italy's deficit by more than 54 billion euros over three years.

Global finance and development leaders are due to gather in Washington next week and are expected to focus on Europe's debt crisis and the risk of a Greek default.

For CRI, I'm Liu Yan.