July 29, 2012 / 5:13 PM / 5 years ago

Merkel and Monti pledge to do everything to protect euro zone

BERLIN (Reuters) - German Chancellor Angela Merkel and Italian Prime Minister Mario Monti will do everything to protect the euro zone and swiftly implement measures agreed by European leaders in June, their governments said in a statement on Sunday.

The wording of the statement, issued after the pair discussed the euro zone crisis in a phone call on Saturday, echoed a pledge made by Merkel and French President Francois Hollande on Friday and the European Central Bank (ECB) President Mario Draghi on Thursday.

European leaders have gone on the offensive in recent days, underlining their commitment to tackling the euro zone’s crippling debt problems and seeking to restore calm after a week in which Spanish bond yields hit euro-era highs and Greece raised concern it would be unable to honor its bailout conditions and could exit the euro.

Draghi’s comments were read by markets as an indication the ECB may revive its program of buying bonds of troubled governments on the secondary market.

Near-bankrupt Greece is desperately struggling to make savings. Its creditors are currently in Athens to assess progress and decide whether to keep it hooked up to a 130-billion euro lifeline.

Greek political leaders had agreed on most of the austerity measures demanded by creditors, a source close to talks said on Sunday, and politicians were now eyeing pension and wage cuts to find the final 1.5 billion euros of savings still needed.

Greece must find savings worth 11.5 billion euros for 2013 and 2014 to satisfy its increasingly impatient lenders.

German Finance Minister Wolfgang Schaeuble said there was no room for any more concessions for Greece, in an interview published in Welt am Sonntag newspaper on Sunday, a view echoed by German Economy Minister Philipp Roesler.

Policymakers are working on “last chance” options to bring Greece’s debts down and keep it in the euro zone, with the ECB and national central banks looking at also taking significant losses on the value of their bond holdings, officials said.

European leaders agreed at a summit at the end of June that their rescue fund could directly inject aid into stricken banks from next year and intervene on bond markets.

They also pledged to create a single banking supervisor for euro zone banks based around the European Central Bank.

The deal was widely seen as a political victory for embattled Monti and his Spanish counterpart, Mariano Rajoy, over Merkel, who had initially brushed aside any need for such emergency measures.

Reporting by Alexandra Hudson; Editing by Mike Nesbit and David Cowell

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