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Barroso Says Debt Crisis 'Greatest Challenge' In EU History

European Commission President Jose Manuel Barroso
Brussels -- The EU Commission president Jose Manuel Barroso has said he is confident that the European Union will survive the current economic crisis and that more economic and political integration is needed to cure the continent's ills.

His annual "State of the Union" address, delivered to members of the European Parliament in Strasbourg, was dominated by the shape of the economy.

The Commission president called the ongoing debt crisis "the greatest challenge" in the history of the European Union, and stressed that only more determination and strong political leadership from Europe's leaders could save the euro currency.

"If we don't continue with integration we risk fragmentation," he said. "It is a question of political will, it is a baptism of fire for all our generations."

"And I am telling you; it is possible to get out of this crisis. It is not only possible, it is necessary and political leadership is there to make the thing that is necessary possible."

Action Plan For Greece

Barroso was also quick to allay fears that Greece, which so far has been bailed-out twice by other eurozone countries, would be excluded from the common currency.

"Greece is and will remain a member of the euro area," he said. "Greece must implement its commitments in full and on time. In turn the euro member's have pledged to support Greece and each other."

Barroso indicated that an action plan had been drawn up by Brussels with 100 economically viable projects in all Greek regions. These would be financed by structural funds -- a redistribution mechanism usually given to poorer member states in the east -- to the tune of 50 billion euros in the coming years.

The president also outlined several proposals -- many of them controversial to EU member states -- which the Commission believes will lead to more economic growth and closer economic integration.

The Portuguese pointed out that the common monetary union must soon be accompanied by an economic union with greater harmonization of budgets and taxation for countries inside the eurozone -- a development that many capitals see as a clear breach of national sovereignty.

"It was an illusion to think that we could have a common currency and a single market with national approaches to economic and budgetary policy," he said. "Let's avoid another illusion that we can have a common currency and a single market with an intergovernmental approach."

Eurobonds And A Beefed-Up Bail-Out Fund

The president also announced upcoming proposals on common eurobonds, which would provide a joint guarantee for the debt of the entire euro area, as well as a beefed up bail-out fund for struggling members and a financial-transaction tax for the EU.

Such moves might have to lead to a treaty change, throwing back painful memories of referenda in France, Ireland and the Netherlands in recent years, which hindered constitutional changes.

Nonetheless, Barroso was not shying away from the possibility of new treaty changes. He indicated that he was hopeful that the member states' veto powers and the unanimity rule could be watered down.

"The pace of our joint endeavor cannot be dedicated by the slowest," he said. "Today we have [a] Union where it is the slowest member that dictates the speed of all the other member states."

Barroso's remarks on foreign policy were dominated by the Arab Spring and the EU's eastern neighbors got a very brief mention at the end of the speech, when the president said he wished for closer political relations and economic integration.
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    Rikard Jozwiak

    Rikard Jozwiak is the Europe editor for RFE/RL in Prague, focusing on coverage of the European Union and NATO. He previously worked as RFE/RL’s Brussels correspondent, covering numerous international summits, European elections, and international court rulings. He has reported from most European capitals, as well as Central Asia.