Osborne: Europe debtors should solve 'own problems'

19th December 2010, Comments 0 comments

British finance minister George Osborne offered some tough love to Europe on Sunday, saying the nations in the region haunted by mounting deficits need individually to "resolve their own problems."

Osborne stressed that European countries like Portugal or Ireland with balance sheets under water should count on euro zone support to avoid collapse, with Europe needing to "deal decisively" with the crisis.

But in an interview with CNN he said "Europe shouldn't have to handle" the plunge in confidence in the ability of such countries to pay their debts.

"Countries that have the euro as their currency need to come up with a decisive plan to deal with the imbalances in a single currency area," Osborne said.

"The second element of the solution is that countries needed to resolve their own problems," he added.

"Ireland's got a major banking problem and is now, with international support, dealing with it. Portugal has got a long-term productivity problem and needs to address that, (and) Spain has got problems in its regional banks and is addressing that," he added.

"So yes, the euro has got to act. But the individual countries of the euro have also got to do that."

Osborne's comments come days after Europe moved to shore up the euro despite divisions over how to bury market fears of a fresh debt crisis engulfing Portugal and Spain.

European Union leaders on Thursday lay the foundation for a permanent financial rescue system from January 2013 to protect the eurozone -- a new milestone in the evolution of the 27-nation European Union, after massive bailouts of Greece and Ireland which totaled nearly 200 billion euros (263 billion dollars).

In the wake of the global financial crisis that began in 2008, several European countries enacted severe austerity measures, including Britain, where the deepest spending cuts in decades are aimed at trying to rein in a record budget deficit.

Osborne also said western nations should view the rise of Asian giants like China and India not with alarm, but as opportunities for the West to sell more of its products to the East as Asians enjoy improving standards of living.

Following Osborne on the CNN program was former prime minister and former finance minister Gordon Brown, who agreed that "the expansion of Asian consumer demand" could be seen as a sort of exit strategy from Europe's economic woes.

But he warned of "a decade of low growth and high unemployment for Europe and for America" if countries dramatically slashed spending.

"Cutting investment in education, universities, research, science, technology, doesn't make any sense to me," Brown said, but he warned that "people are pessimistic and looking at things and retreating into national shells at the moment."

© 2010 AFP

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