President Barack Obama today pledged to help tackle the European debt crisis, describing it as an issue of "huge importance" for the US economy.
In the United States, Mr Obama met European Union officials today to press them to resolve their sovereign debt crisis, an increasing worry for the US economy and issue in the 2012 US election campaign.
Mr Obama said at the US-European Union summit the United States is willing to do its part to help resolve the European debt crisis. He said the European crisis is a "huge issue" for the US economy and that his country has a stake in its successful conclusion.
European Council President Herman Van Rompuy said slower global growth is not solely due to the European Union and that other nations must act.
Today's meeting with Mr Rompuy and European Commission president Jose Manuel Barroso gave Mr Obama a chance to increase pressure on EU officials to act decisively to prevent further contagion.
Mr Obama has been in regular telephone contact with German chancellor Angela Merkel, French president Nicolas Sarkozy and other European leaders as debt woes have piled up in Greece, Italy and Spain, hurting stock markets and raising doubts about US exports and growth.
The Organisation for Economic Cooperation and Development (OECD) today issued a warning that global economic recovery is running out of steam, leaving the euro zone stuck in a mild recession and the United States at risk of following suit.
The rich nations' economic think-tank said the European Central Bank (ECB) should cut interest rates and step up purchases of government bonds to restore confidence in the euro area, which now posed the main risk to the world economy.
The threat of even more devastating downturns looms if the euro zone does not get to grips with its debt crisis and US politicians fail to agree a spending-reduction plan, the Organisation for Economic Cooperation and Development warned.
Earlier today, Germany and France stepped up a drive for coercive powers to reject national budgets in the euro zone that breach EU rules, as a market rout of European debt eased temporarily on hopes of outside help for Italy and Spain.
In Brussels, finance ministers of the 17-nation currency area meeting tomorrow are due to approve detailed arrangements for scaling up the European Financial Stability Facility rescue fund to help prevent contagion in bond markets, and release a vital aid lifeline for Greece.
Berlin and Paris aim to outline proposals for a fiscal union before a European Union summit on December 9th, increasingly seen by investors as possibly the last chance to avert a breakdown of the single currency area.
"We are working intensively for the creation of a Stability Union," the German Finance Ministry said in a statement. "That is what we want to secure through treaty changes, in which we propose that the budgets of member states must observe debt limits."
European stocks rallied today amid hopes euro zone leaders will adopt fresh measures to resolve the debt crisis ahead of next week's European Union summit. European stocks rose more than 2 per cent in a rally largely seen as technical.
However, the news flow for the euro zone remains negative with Standard & Poor's downgrading Belgium's credit rating on Friday and today's warning by Moody's that the rapid escalation of the region's sovereign and banking crisis threatens the rating of all European government bonds.
"Moody's is sounding the alarm for the euro zone. It's a reminder of what's already in the prices: not a single country is immune from the crisis," said Sebastien Barthelemi, analyst at Louis Capital Markets, in Paris. "The question now is: are we heading towards more integration or towards the disintegration of the euro zone?"
Euro zone finance ministers will meet tomorrow to consider detailed rules to boost the impact of a €440 billion fund.
Germany and France are exploring ways to secure deeper fiscal integration among euro zone countries, including the option of a separate agreement outside the EU treaty that could involve a core of around eight to 10 euro zone countries.
Germany has so far strongly opposed the idea of the ECB providing liquidity to the region's rescue fund or acting as a lender of last resort.
Italy is in the eye of the euro zone debt storm after its borrowing costs returned to the levels that triggered the collapse of former prime minister Silvio Berlusconi's centre-right government.
Italian yields are now in the territory that forced Greece, Ireland and Portugal to seek international bailouts and an auction tomorrow of up to €8 billion of bonds will be a crucial test.
Italian prime minister Mario Monti is expected to unveil measures next Monday that could include a revamped housing tax, a rise in sales tax and accelerated increases in the pension age. But pressure from the markets could force him to act more quickly.
Agencies