EU chiefs back both growth, fiscal consolidation: Berlin

The leaders of Britain, Germany, France, Italy and senior EU officials agreed Thursday that both budget consolidation and growth are necessary to tackle the eurozone crisis, Berlin said.

During a video-conference "there was a high degree of agreement that fiscal consolidation and growth are not mutually exclusive but that both are needed," a spokesman for German chancellor Angela Merkel said in an email.

Merkel, new French President Francois Hollande, Italian Prime Minister Mario Monti, British Prime Minister David Cameron, EU president Herman Van Rompuy and European Commission head Jose Manuel Barroso took part, Cameron's office said.

The call came as fears over a possible disorderly Greek euro exit rocked Spain and Italy.

Germany, France, Italy and Britain are all members of the Group of Eight major industrialised economies, which meet Friday and Saturday for a summit at the Camp David presidential retreat near Washington.

Cameron's office said the leaders had discussed the G8 and the eurozone "including Greece, growth, and the importance of expanding trade relations between the US and EU".

The conversation was "constructive", it added in a statement, while the French presidency said there had been a "broad convergence of views".

Socialist Hollande has vowed to make economic growth a key component of eurozone austerity efforts to reduce debts since he won an election on May 6.

US Treasury Secretary Timothy Geithner this week welcomed an apparent pro-growth shift from the earlier European consensus prioritising tough austerity measures.

But a spokeswoman for Monti's Italian government said Thursday's call was "only a preparatory meeting between the G8 European leaders".

Van Rompuy said in a statement that the video-conference was to "exchange views and co-ordinate positions on the main issues" before the summit.

The leaders spoke after a caretaker government took office in Greece to organise its second election in six weeks after an inconclusive election on May 6, as fears over a possible disorderly euro exit rocked Spain and Italy.

In Spain, the government is desperately trying to shore up a crippled banking system amid concerns it may need outside help to do so.

In the video-conference, Cameron "emphasised the importance of Greece and the eurozone taking decisive action to ensure financial stability and prevent contagion," his office said.

Britain does not use the euro but Cameron warned Thursday that his government's plans to cut a record deficit and return to growth were being jeopardised by "head winds" from the euro crisis.

"The eurozone is at a crossroads. It either has to make up or it is looking at a potential break-up," he said in a speech to business leaders in the northwestern city of Manchester.

"Either Europe has a committed, stable, successful eurozone with an effective firewall, well capitalised and regulated banks, a system of fiscal burden sharing, and supportive monetary policy across the eurozone -- or we are in uncharted territory which carries huge risks for everybody."

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