June 20, 2012 (TSR) – Europe doesn’t need economic “lessons” from the US, a top European official said, blaming the US for the crisis.
“Frankly, we are not coming here to receive lessons in terms of democracy or in terms of how to handle the economy because the European Union has a model that we may be very proud of,” European Commission President Jose Manuel Barroso said at the summit of the Group of 20 leading industrial and developing economies in Los Cabos, Mexico.
Answering a question by a Canadian journalist about why North Americans should risk their assets to help Europe, Barroso reminded him that the current crisis originated in the US with much of the European financial sector contaminated by what he called “unorthodox practices from some sectors of the financial market.”
Barroso has also urged all G20 countries to contribute more to the International Monetary Fund to help Europe.
The US and Canada are the only G20 members confirming they will not chip in as part of a plan to raise more than $430 billion in new commitments.
Barroso spoke as G20 fears rose that Spain would soon become the fourth eurozone country to seek a full-scale international bailout.
The yield on the Spanish 10-year bond reached 7.13 percent Monday. A yield above 7 percent has already prompted bailouts of Greece, Ireland and Spanish neighbor Portugal.
Barroso said the link between highly indebted governments and insolvent banks needed to be broken, and said Spain could be a starting point, with banks getting bailed out without increasing Spain’s sovereign debt.
“Certainly the European Commission … will be in favor of a system that avoids, as far as possible, any kind of contamination between financial debt and sovereign debt because we believe that this is one of the issues that can have a negative impact in terms of market reaction,” he said, referring to financial-market routes that work against presumed bailout benefits.
The Group of 20 leaders’ summit is into its second day and while there has been some strong rhetoric from the leaders, there have been no concrete decisions.
Financial markets are overall displaying less activity with investors waiting for Greece’s New Democracy party to come to a coalition agreement with the socialist PASOK party, which could help bring some political stability to the country.
Greek political leaders have yet to come to terms over the unpopular bailout and a coalition deal may not be struck until later in the week.
“There will be a government but I don’t know if it will be formed by tonight. I believe we will have reached an agreement by the end of the week,” Democratic Left leader Fotis Kouvelis told reporters.
On Monday, European Council President Herman Van Rompuy said Greek voters had made a clear choice about staying in the euro currency, following weeks of uncertainty in financial markets.
“The euro area member states are determined all the more after the choice made by the Greek people,” he said Van Rompuy referring to the victory of New Democracy, a party that backs the bailout but would like to renegotiate parts of the agreement.