Obama and Hollande pledge growth and stability

Obama and Hollande pledge growth and stability
Photo: Pete Souza/White House
US President Barack Obama and his French counterpart Francois Hollande backed European growth and eurozone stability on Wednesday, ahead of key decisions on resolving the debt crisis.

Speaking as the US Federal Reserve decided against adopting any new stimulus measures for a slowing US economy, the French president's office said the two leaders "expressed their common interest in growth in Europe and the stability of the eurozone, which are necessary for the recovery of global economic activity."

The European Central Bank is meeting Thursday as markets look for strong action to quell the eurozone crisis.

ECB chief Mario Draghi last week sent markets soaring with an unusually strong pledge to do "whatever it takes" to save the crisis-wracked euro.

This touched off a raft of similar promises from top eurozone leaders including German Chancellor Angela Merkel, sparking speculation over a
possible intervention on the markets to bring down borrowing costs for Spain and Italy.

Analysts are eyeing three possible ECB actions that could help ease the eurozone debt crisis: an interest rate cut; a decision to buy the government bonds of struggling nations or offering the EU rescue fund unlimited borrowing.

A rate cut is not seen as a likely option, following last month's decision to slash rates to a historic low of 0.75 percent.

In Helsinki, Italy Prime Minister Mario Monti met with Finnish Prime Minister Jyrki Katainen in a bid to persuade Katainen to embrace bolder moves
to tame the eurozone crisis.

Monti's visit was both an attempt to mend ties with an outspoken hardliner and the latest in a series of trips to European capitals to lobby reluctant
members of the single currency zone to help shore up the euro. He was full of compliments for Katainen and Finland, calling his counterpart "one of the most interesting interlocutors" and declaring himself "an admirer of Finland."

But he did not mince words when discussing the gravity of the two-and-a-half-year crisis, which has seen Italy's borrowing costs skyrocket and raised fears the country could need a bailout, especially if Spain were to fall.

"There is no denying that the markets are largely dysfunctional," Monti told a press conference.

The Finnish prime minister put his foot down on the question of using eurozone bailout funds to intervene in the secondary bond markets to help ease borrowing costs for weaker eurozone states.

He said going that route risked the collapse of the European Financial Stability Facility (EFSF) bailout fund and the European Stability Mechanism (ESM), which is due to replace the EFSF next year.

Katainen has said that while all eurozone members want to save the single currency, "countries and people do not trust each other as much as before."

The US Federal Reserve on Wednesday meanwhile downgraded its assessment of the US economy, saying growth had slowed, but shied away from launching a fresh round of economic stimulus.

The interest rate-setting Federal Open Market Committee said it expected "economic growth to remain moderate over coming quarters and then to pick up very gradually."

But there was no new action to fuel the economy and bank policymakers instead reiterated their pledge to leave interest rates close to zero until the end of 2014.

The Fed has kept interest rates at historic lows, between zero and 0.25 percent, since December 2008 in a bid to spur recovery from the Great Recession.

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