By Marcin Grajewski and Dave Graham
BRUSSELS, Jan 19 (Reuters) - Finance ministers reaffirmed a commitment to sustainable government finances in the euro zone on Monday after warnings from credit rating agencies about the debts of Greece, Spain, Ireland and Portugal.
The ministers agreed that exceptional spending announced so far by governments to combat recession was enough and that they need not go further, the man who chaired the meeting, Luxembourg's Jean-Claude Juncker, told a news conference.
'As far as the (bond market) spreads are concerned, we are following the developments closely,' Juncker said.
European Economic Affairs Commissioner Joaquin Almunia told the same news conference that the markets and credit rating agencies would take a more positive view of the situation had they been at the ministers' talks and heard the extent of the commitment to stable public finances.
The euro lost ground to the dollar on Monday after Spain, following Greece, became the second euro zone country in a week to see its credit rating cut by agency Standard & Poor's, stoking fears of more downgrades.
The cut in Spain's rating to 'AA+' from 'AAA', a level Spain had held since late 2004, sent the euro to a session low against the dollar as investor attention turned to the risk of Portugal and Ireland suffering the same fate after S&P warnings too.
Almunia dismissed a news conference question about the risk of any country defaulting, saying contingency planning was not even an issue in that regard.
Several ministers who attended the talks sought to reassure on the commitment to well-managed public finances.
'We should not only think of ways to stimulate the economy but also how to pay the bill, and how to make sure we all move back to sustainable paths for our finances,' Wouter Bos, Dutch finance minister, told reporters.
'This biggest worldwide economic crisis arose by getting into debt,' Josef Proell, Austria's new finance minister, said.
'You can't fight a debt crisis by getting into more debt. That's why we need to proceed very carefully.'
German Finance Minister Peer Steinbrueck reiterated Berlin's attachment to respecting European deficit control rules.
HARD TIMES
The ministers, to be joined on Tuesday by their colleagues from the European Union countries not using the euro, met hours after the European Commission forecast the euro zone's first full recession this year since its establishment 10 years ago.
Germany, after initial hesitation, has announced additional government plans to spend 50 billion euros ($65.7 billion) this year and next in an attempt to boost demand and limit recession. France has unveiled plans for 26 billion euros in stimulus.
The European Commission, the European Union's executive arm, is urging the 27-nation EU as a whole to come up with a total of 200 billion euros, or 1.5 percent of gross domestic product, a goal Juncker said they were on line to meet.
The Commission said it expected gross domestic product in the euro zone to fall 1.9 percent in 2009, and grow by only 0.4 percent in 2010, after an expansion of 0.9 percent for 2008.
It forecast that 11 euro zone countries would be in recession in 2009, against two in 2008. Ireland would be hit the most, contracting by 5 percent, with the biggest economy, Germany, coming second with a GDP drop of 2.3 percent.
The Commission, which said the economies of Italy and Spain were expected to shrink 2 percent, Belgium 1.9 percent and France 1.8 percent, also predicted a surge in euro zone unemployment, to a rate of 10.2 percent in 2010.
That is equivalent to 15.9 million jobless and a rise of 3.7 million from the 12.2 million unemployed in November, the latest month for which official data are available and when the jobless rate stood at 7.8 percent.
That amounts to a rise of 25 percent or more.
BANKS
As the ministers met, Britain, which remains outside the euro club, announced further plans to help a crisis-hit bank sector by offering, among other things, insurance against losses on rotten assets.
No such plans have been hatched by any countries in the euro zone. Neither Germany nor France seemed from initial reactions to be in a rush to replicate London's move, the second in three months to deal with a global financial crisis qualified widely as the worst since the Great Depression of the 1930s.
Britain pumped 37 billion pounds ($53.6 billion) of public money into the banks in October in a move quickly followed by similar drastic action across Europe, but immediate reactions to the new plan were more muted.
In Germany, Finance Ministry spokesman Torsten Albig said the government planned no further assistance for the financial sector.
And French Economy Minister Christine Lagarde, interviewed by Reuters on her way to the meeting in Brussels, said:
'French banks are not at all in the same situation as the British banks, thank goodness.'
(Writing by Brian Love, with additional reporting by Anna Willard, Huw Jones, Francesca Landini, Ilona Wissenbach, Julien Toyer and Jan Strupczewski; editing by Dale Hudson) ($1=.7606 euro) ($1=.6900 pound) Keywords: EUROPE ECONOMY/EUROGROUP (brian.love@reuters.com; +33 1 49495339; Reuters Messaging brian.love@reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
BRUSSELS, Jan 19 (Reuters) - Finance ministers reaffirmed a commitment to sustainable government finances in the euro zone on Monday after warnings from credit rating agencies about the debts of Greece, Spain, Ireland and Portugal.
The ministers agreed that exceptional spending announced so far by governments to combat recession was enough and that they need not go further, the man who chaired the meeting, Luxembourg's Jean-Claude Juncker, told a news conference.
'As far as the (bond market) spreads are concerned, we are following the developments closely,' Juncker said.
European Economic Affairs Commissioner Joaquin Almunia told the same news conference that the markets and credit rating agencies would take a more positive view of the situation had they been at the ministers' talks and heard the extent of the commitment to stable public finances.
The euro lost ground to the dollar on Monday after Spain, following Greece, became the second euro zone country in a week to see its credit rating cut by agency Standard & Poor's, stoking fears of more downgrades.
The cut in Spain's rating to 'AA+' from 'AAA', a level Spain had held since late 2004, sent the euro to a session low against the dollar as investor attention turned to the risk of Portugal and Ireland suffering the same fate after S&P warnings too.
Almunia dismissed a news conference question about the risk of any country defaulting, saying contingency planning was not even an issue in that regard.
Several ministers who attended the talks sought to reassure on the commitment to well-managed public finances.
'We should not only think of ways to stimulate the economy but also how to pay the bill, and how to make sure we all move back to sustainable paths for our finances,' Wouter Bos, Dutch finance minister, told reporters.
'This biggest worldwide economic crisis arose by getting into debt,' Josef Proell, Austria's new finance minister, said.
'You can't fight a debt crisis by getting into more debt. That's why we need to proceed very carefully.'
German Finance Minister Peer Steinbrueck reiterated Berlin's attachment to respecting European deficit control rules.
HARD TIMES
The ministers, to be joined on Tuesday by their colleagues from the European Union countries not using the euro, met hours after the European Commission forecast the euro zone's first full recession this year since its establishment 10 years ago.
Germany, after initial hesitation, has announced additional government plans to spend 50 billion euros ($65.7 billion) this year and next in an attempt to boost demand and limit recession. France has unveiled plans for 26 billion euros in stimulus.
The European Commission, the European Union's executive arm, is urging the 27-nation EU as a whole to come up with a total of 200 billion euros, or 1.5 percent of gross domestic product, a goal Juncker said they were on line to meet.
The Commission said it expected gross domestic product in the euro zone to fall 1.9 percent in 2009, and grow by only 0.4 percent in 2010, after an expansion of 0.9 percent for 2008.
It forecast that 11 euro zone countries would be in recession in 2009, against two in 2008. Ireland would be hit the most, contracting by 5 percent, with the biggest economy, Germany, coming second with a GDP drop of 2.3 percent.
The Commission, which said the economies of Italy and Spain were expected to shrink 2 percent, Belgium 1.9 percent and France 1.8 percent, also predicted a surge in euro zone unemployment, to a rate of 10.2 percent in 2010.
That is equivalent to 15.9 million jobless and a rise of 3.7 million from the 12.2 million unemployed in November, the latest month for which official data are available and when the jobless rate stood at 7.8 percent.
That amounts to a rise of 25 percent or more.
BANKS
As the ministers met, Britain, which remains outside the euro club, announced further plans to help a crisis-hit bank sector by offering, among other things, insurance against losses on rotten assets.
No such plans have been hatched by any countries in the euro zone. Neither Germany nor France seemed from initial reactions to be in a rush to replicate London's move, the second in three months to deal with a global financial crisis qualified widely as the worst since the Great Depression of the 1930s.
Britain pumped 37 billion pounds ($53.6 billion) of public money into the banks in October in a move quickly followed by similar drastic action across Europe, but immediate reactions to the new plan were more muted.
In Germany, Finance Ministry spokesman Torsten Albig said the government planned no further assistance for the financial sector.
And French Economy Minister Christine Lagarde, interviewed by Reuters on her way to the meeting in Brussels, said:
'French banks are not at all in the same situation as the British banks, thank goodness.'
(Writing by Brian Love, with additional reporting by Anna Willard, Huw Jones, Francesca Landini, Ilona Wissenbach, Julien Toyer and Jan Strupczewski; editing by Dale Hudson) ($1=.7606 euro) ($1=.6900 pound) Keywords: EUROPE ECONOMY/EUROGROUP (brian.love@reuters.com; +33 1 49495339; Reuters Messaging brian.love@reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.