Spain can't continue much longer with its current high borrowing rates, the prime minister warned Wednesday as he urged a joint European response to keep the region's debt problems from getting worse.
Mariano Rajoy and newly elected French President Francois Hollande, heading later in the evening to meet other European Union leaders, also stressed their commitment to keeping Greece in the euro despite its political uncertainty.
"Europe has to come up with an answer. It is a must, because we cannot go on like this for a long time, with large differences when it comes to financing ourselves. And it is because of these differences that the policies that we Europeans believe in, such as controlling government spending and reforms to encourage growth, ultimately have no effect," Rajoy said in Paris alongside Hollande.
"So I am going to talk about liquidity, financing and debt sustainability. For me it is the most important thing today. There are a lot of important things but this is the most urgent one," he said.
Rajoy suggested the European Central Bank resume some of its emergency measures, such as buying the bonds of weak countries, which has the impact of lowering countries' borrowing rates.
Hollande said the ECB's role would be discussed by European leaders, and said he will formally propose so-called eurobonds — debt issued jointly by eurozone countries — at Wednesday's summit.
Such bonds would aim at bringing down borrowing rates by distributing the risk of some countries debt. Germany is opposed because it would raise its own borrowing rates and reduce the pressure on heavily indebted governments to heal their finances. Rajoy said he doesn't think the 27 EU leaders meeting in Brussels will resolve the eurobond dispute Wednesday.
Hollande insisted he would stick by his push for a Europe-wide growth pact by the end of June. He won election earlier this month in part on his attacks on austerity measures championed by his conservative predecessor Nicolas Sarkozy and Germany's Angela Merkel. His political plans remain uncertain, however, depending on whether his fellow Socialists take control of parliament in legislative elections next month.
Pressure is rising on European leaders to agree to new growth measures to complement the budget cuts. Both the International Monetary Fund and the Organization for Economic Cooperation and Development have said the pace of austerity measures should be slowed in some countries to lower the risk of a severe recession.
The OECD, which monitors economic trends in developed economies, openly called for the use of eurobonds and more emergency measures from the European Central Bank to keep the slowdown from dragging down the global economy.
Alongside economic growth, Greece's electoral turmoil and dismal finances will be high on leaders' minds in Brussels. Hollande said he would "do everything to convince the Greeks to stay in the euro."
Rajoy agreed there was no doubt the country should remain in the currency union: "What I want is that Greece stays in the eurozone, that's what's best for Greece and best for Europe."
Borrowing costs are up for the most indebted governments. There is an increasing number of reports of worried savers and investors pulling funds out of banks that are seen as weak. Meanwhile, unemployment is soaring as recession grips nearly half the eurozone countries.
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