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Clinton urges strong European response to debt crisis

Published on 02/07/2011

US Secretary of State Hillary Clinton on Saturday called on European leaders to make a powerful response to economic crises rippling across Europe.

During a visit to Madrid she also praised reforms by Spanish Prime Minister Jose Luis Rodriguez Zapatero to revive the economy and rein in debt aimed at calming market fears that Spain will follow in the footsteps of Greece, Ireland and Portugal in seeking a financial bailout.

“It is our hope that European leaders continue to make sure that Europe’s response to the crisis is strong, flexible and effective,” Clinton told a joint news conference with Spanish Foreign Minister Trinidad Jiminez.

“Under Zapatero’s leadership the Spanish government has taken important steps to strengthen its finances, restore the banking sector and improve its competitiveness. We understand how difficult these steps are.

“And we know that Spain still faces significant challenges as it works to consolidate its finances, bring down unemployment and overcome the legacy of the global economic crisis,” Clinton added.

Zapatero’s government has raised taxes and slashed spending to bring down the public deficit and has reformed the labour law to make it easer to fire workers to encourage hiring and bring down a jobless rate of just over 21 percent, the highest in the developed world.

The reforms have fueled demonstrations and hurt the government’s popularity but Clinton said she was confident that Madrid “will continue the process of reform.

“I want to say publicly how much we understand it takes time and patience to make these changes and see them through,” she added.

Her comments echoed those of US Treasury Secretary Timothy Geithner, who earlier this month warned that ambitious fiscal reform plans put in place in several European nations will take years, not months, to bear fruit.

Last week US Federal Reserve chief Ben Bernanke warned that failure to resolve the European sovereign debt crisis could threaten the stability of the global financial system if a solution is not found.

“We are mostly just following the situation closely and making sure as best as we can that our own institutions are well-positioned relative to sovereign debt in the so-called peripheral countries,” he said, referring to the smaller, ailing eurozone economies such as Greece, Ireland and Portugal.

“A disorderly default in one of those countries would no doubt roil financial markets globally. It would have a big impact on credit spreads, on stock prices, and so on. And so in that respect, I think the effects in the United States would be quite significant,” he added.