Big Spenders to blame for Euro crisis, says PM

By CHRIS GRAEME [email protected]

As France and Germany held a round of meetings in Paris to save the Euro from implosion, the Portuguese prime minister admitted the EU needed tougher penalties against big-spending countries.

Pedro Passos Coelho said that the current crisis was not the fault of either Germany or France, but that of spendthrift countries like Portugal, Spain, Italy and Greece.

“It’s a good thing that all those that contributed towards this illusory wealth now have the humility to recognise that the blame being handed out in Portugal does not belong to Mr Sarkozy, Mrs Merkel or Europe.

“The blame lies squarely with all those who pursued a development model that wasn’t realistic, sustainable or fair,” he said.

Jumping to the defence of the French-German Axis, he said that Portugal “owed money to Europe”.

“When countries are undisciplined and put others at risk, it’s natural that those who manage their economies better and lend money should want guarantees and the knowledge that the money they lent is well spent,” he added.

The Prime Minister made his statements at the start of a week which is likely to be decisive for the future of the Euro zone.

Paris and Berlin have decided to impose a new treaty on Euro zone countries by March 2012.

The new treaty will include stricter rules over budgetary discipline and tougher sanctions for countries that refuse to toe the spending line.

It also means a step closer to future fiscal and budgetary union and further erosion of sovereignty for individual EU member states – something Britain is set against.

The details of the outline new treaty are likely to be hammered out by today (Friday) after a week in which inside sources at one United States ratings agency, Standard & Poors, admitted that a list of 15 countries risk having their AAA creditworthiness downgraded.

Sources said that the sovereign debt crisis was no longer about individual countries but its impact on Europe as a whole. It was vital to come up with a solid solution to the crisis.

There was a further blow this week too, as official figures confirmed that the 17 economies within the euro area grew by just 0.2% in the third quarter – raising the spectre of a double-dip recession.

Both the United States and the United Kingdom would be adversely affected by a recession in Europe – both key trading partners.

At the beginning of the week, upsetting images were beamed around the world of the Italian welfare minister, Elsa Fornero, struggling to hold back tears during a press conference over the “sacrifices” pensioners would have to face due to a €20 billion austerity package unveiled by the new prime minister, Mario Monti.