Japan calls on Europe to act 'responsibly'

6 Jun 2012, 3:52 pm   -   Source: AAP

Japan says Europe must act "responsibly" to solve the debt crisis that is wrecking the world economy.

Japan says Europe must act "responsibly" to solve the debt crisis that is wrecking the world economy after G7 finance ministers ramped up pressure on the continent's leaders.

Japanese Finance Minister Jun Azumi said politicians needed to move to stem the tide.

"As the big aim is to overcome the crisis, Europe in particular needs to act appropriately and responsibly," he told reporters.

Azumi was speaking the morning after an emergency teleconference with fellow finance ministers in the G7 group of leading industrialised nations.

Immediately after the conference call late on Tuesday, Azumi said he had been given assurances by his European counterparts that they will work to fix the problems gripping the continent.

"(They) said they will handle the issues, including Spain's debt problems, in a responsible manner, and I trust them," he said, according to Dow Jones Newswires.

Azumi said political leaders needed to act to reassure markets, which have proved increasingly volatile, with traders seemingly unimpressed by what many see as half-measures.

"I said I want them to take detailed steps in a successive fashion to make not only us but also the market feel safe," he said.

Japan has become more anxious over the effects of the debt problem in Europe, which is a key market for the exports that drive its economy.

Global financial uncertainty has also driven market players to seek refuge in the safe haven yen, sending the currency soaring and further squeezing companies that make their money abroad.

Overnight the White House said it hoped for "accelerated" action on the crisis in Europe and on shoring up debt-ridden banks, as world leaders ready for the G20 in Mexico later this month.

"European leaders seem to be moving with a heightened sense of urgency and we welcome that. We are hoping to see accelerated European action over the next several weeks," White House spokesman Jay Carney said.

"A movement to strengthen the European banking system will be of particular importance in this time period."

European members of the G7 told the conference call they would act "speedily" as Spain pleaded for deeper fiscal and banking integration that would help its stumbling banks.

"Europe must say where it is going, to give itself unity, it must say that the euro is an irreversible project that is not in danger, it must help nations in difficulty," Spanish Prime Minister Mariano Rajoy told MPs.

"In my opinion it needs fiscal integration, with a fiscal authority, and banking integration, a banking union with eurobonds, with a banking supervisor and a European bank deposit guarantee fund."

Spain wants the EU to allow the European Stability Mechanism (ESM) bailout fund - due to come into force in the coming weeks - to directly recapitalise banks struggling to raise 80 billion euros to shore up their books.

A state bailout from the EU and the International Monetary Fund would come with a politically humiliating austerity program attached to it.

Germany has opposed changing the ESM's rules to allow direct intervention in banks until the eurozone puts into place stronger measures on banking and fiscal integration.

Bailing out Spain, the eurozone's fourth largest economy, representing 12 per cent of the bloc's output, would be costly.

Cyprus, which has been shut out of the bond banks, also sounded the alarm Tuesday over its banks.

"The possibility of addressing the financial stability mechanism to support the banking system, due to the problems created by excessive exposure of banks to Greece, is a serious possibility," deputy government spokesman Christos Christofides told reporters.

He said the government was looking at various ways to support its banks, which included finding a loan "from elsewhere".

Cyprus has already secured a 2.5 billion euro ($3.2 billion) low-interest loan from Russia to cover its refinancing needs for this year.

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