Germany and France issued a joint statement saying they are "deeply committed to the integrity of the eurozone," adding that members and European institutions “must comply with their obligations.”
German Chancellor Angela Merkel and French President Francois Hollande, the leaders of the eurozone's two largest economies and from opposite ends of the political spectrum, spoke by telephone on Friday afternoon.
Afterwards, they issued a joint statement which confirmed they are "determined to do everything to protect the eurozone."
Merkel and Hollande underlined the need to "implement quickly" decisions made by a European Union summit last month. These include proposals for Europe's bailout fund to give money directly to banks, rather than via the governments.
This could mean that countries undertaking to implement reforms would be able to tap rescue funds without having to go through the kind of austerity measures demanded of Greece and Ireland.
Following the ECB
The joint statement came a day after Mario Draghi, President of the European Central Bank (ECB), told business leaders in London that the ECB would do "whatever it takes" to preserve the euro.
Draghi's comments raised expectations that the ECB could intervene and effect a reduction in the high borrowing costs that are crippling countries such as Greece and Spain.
Merkel and Hollande made no specific reference to the ECB's role in helping solve the crisis, but Merkel's Finance Minister Wolfgang Schäuble earlier Friday welcomed Draghi's remarks to "take the necessary measures to secure the euro in the framework of the existing ECB mandate." The Ministry statement did not specify what the measures might be.
"The condition for this is that policymakers also take and implement the necessary measures to deal with the financial and confidence crisis" the Ministry statement added. "In the first place stand the reform efforts of the countries themselves," it said.
However, Germany's central bank, the Bundesbank, repeated its opposition to any further government bond purchases by the ECB or to allowing the bloc's rescue funds access to ECB financing.
A Bundesbank spokesman told the Dow Jones Newswires that the "Bundesbank hasn't changed its opinion" on such purchases and it regards further ECB bond-buying as "problematic" and "not the most sensible" instrument for overcoming the debt crisis.
The Bundesbank is not against using the eurozone's temporary rescue fund to drive down sovereign borrowing costs. Government bond purchases by the European Financial Stability Facility, or EFSF are "unproblematic," because the fund is not a central bank, the bank was reported as saying.
However, granting a banking license to the rescue funds would amount to financing governments, which would violate the mandate of the central banks.
While the Bundesbank is the central bank of the eurozone's biggest economy, it has only one vote on the ECB's 23-member governing council. It could therefore be overruled on the issue.
jm/sej (Reuters,dpa, AFP)