Portugal calls on US to help Eurozone

The United States should play its part in helping to resolve the eurozone debt crisis, the Portuguese Government said yesterday, as world leaders prepared for the most significant G20 meeting for years.

Portugal's Prime Minister, Pedro Passos Coelho, asked Mexican President Felipe Calderon to convey the message to President Barack Obama that the US should offer "financial help" to what was a "systemic and global" problem, according to a Portuguese government source.

Europe remains at a dangerous crossroads despite the €1 trillion ($1.7 trillion) rescue package agreed to by EU leaders last week, with China remaining cool on the idea that it contribute up to €70 billion to the fund.

The G20 host, French President Nicolas Sarkozy, will trumpet yet more drastic measures that have been forced on the world's economic powers as they struggle to resolve the seemingly never-ending consequences of the financial collapse.

Sarkozy and German Chancellor Angela Merkel all but saved the eurozone last week when they agreed to increase the European Financial Stability Facility (EFSF) to €1 trillion.

A parallel special purpose fund or funds will be established, which will buy government bonds from struggling eurozone countries.

The International Monetary Fund (IMF), Japan and China will be asked to participate.

But on the eve of the summit to be held in France this week pressure was mounting on the US - itself battling recession - to drum up support for the eurozone.

Already questions have been raised over whether the rescue fund will work. For a start, it is not clear whether the IMF has agreed to participate.

On Saturday, Italy's borrowing costs soared to their highest levels since it joined the euro, an unsustainable 6.06 per cent, a signal that the market has little faith in plans to curb the crisis.

Silvio Berlusconi, Italy's scandal-hit Prime Minister, did not help by describing the euro as a strange currency that was undermining an otherwise strong economy.

How the new bonds will work and their interest rates will not be set until January, effectively making the EFSF agreement a hypothetical exercise for the next three months.

- Independent