The European Union's top official has defended the political will of EU leaders to resolve the euro zone debt crisis, despite concerns that they seem unable to halt a slide back into recession and avoid a fresh banking crisis.
Speaking at a conference in Australia, European Commission president Jose Manuel Barroso also said there were no plans to create a European ratings agency.
The EU, with the backing of the International Monetary Fund, has set up a €440 billion stability fund to help weaker member countries, fight financial market contagion and prevent a crisis of confidence among banks.
However, markets have questioned the EU's resolve to see this plan through, with doubts over political support for it in Germany, Europe's biggest economy, and over the ability of major borrower Italy to implement an austerity package.
European shares fell to their lowest close in more than two years today, on worries that the euro zone debt crisis was deteriorating, with political discord in the region, and that major economies were headed for recession.
"I believe we will solve it," Mr Barroso said in a speech at the Australian National University in Canberra. "A lot has been done and we are in the process of completing a very complex architecture. I can tell you very honestly I believe there is a strong determination of the leaders of the euro zone and the members states to support the financial stability of the euro zone and the euro."
Outgoing European Central Bank chief Jean-Claude Trichet and his successor, Mario Draghi, yesterday demanded urgent political action to bring the euro zone crisis under control as markets once again suffered heavy losses.
Mr Trichet said in Paris that governments were only halfway through the reforms needed to strengthen the financial sector and he called for stricter economic governance. Saying he could imagine a "federal government" in Europe, he said measures may be required to overrule decisions by governments which persistently breach budgetary rules.
Mr Trichet, who retires next month, called on euro zone governments immediately to approve measures to strengthen the European Financial Stability Facility bailout fund, from which Ireland draws rescue loans.
Mr Barroso, in Australia for meetings with the government ahead of a Pacific Islands summit in New Zealand this week, said fiscal consolidation was Europe's most serious challenge.
He said the euro remained a stable and credible currency, and leaders would do whatever was needed to ensure financial stability in the euro zone.
"The euro remains an extremely important, credible, stable currency," he said. "European leaders, the IMF, and countries providing most of the support will do whatever it takes, whatever is necessary, to keep financial stability in the euro zone."
Speaking later in Sydney, Barroso said there were no plans to create a single European credit rating agency despite a push from some politicians who say existing bodies are anti-European.
"We have no intention to create any kind of public rating agency. What we are trying to do is ... implement reforms that are needed and to reduce of course their (European nations') levels of debt," he said.
There has been a debate about the role of rating agencies in Europe, which were criticised for underestimating sovereign debt risks ahead of the 2008-2009 global financial crisis.
"Whether we agree or not with each one of the decisions of the rating agencies, one thing is sure : we have to reduce the deficits to ensure the sustainability of our public finances," Mr Barroso said.
He said the European union remained committed to building relationships in Asia and the Pacific, and said Europe's crisis would not lead to a new round of introspection.
Additional reporting: Reuters
