Germany, Italy, France and Spain today agreed to to push for growth plan of as much as €130 billion for the 17-nation euro zone.
German chancellor Angela Merkel, French president Francois Hollande, Spanish prime minister Mariano Rajoy and Italian prime minister Mario Monti agreed to the plan during a four-way summit in Rome today to restore confidence in the euro zone ahead of a full EU summit next week.
"This €130 billion is a strong signal," Mr Hollande said at a press conference after the meeting.
Mr Hollande and Dr Merkel also said the four leaders have agreed to bring proposals for a financial transaction tax to the summit.
Mr Monti told the news conference after the four-way summit the leaders recognise that steps taken so far have not been sufficient. He said both markets and EU citizens need to view the euro as “irreversible”.
Mr Rajoy said he is satisfied with a pledge from the other three leaders to defend financial stability. "We have all committed to putting into place all the mechanisms necessary to achieve financial stability in the EU," Mr Rajoy said. "This satisfies me. I leave this meeting enormously pleased."
Next week's summit is expected to tackle long-term plans for closer fiscal and banking union in a bid to strengthen the euro's foundations, after bailouts for Greece, Ireland and Portugal failed to end a two-year-old debt crisis.
Dangerously high borrowing costs for Spain and Italy have eased a little on market hopes for policy initiatives at the Brussels summit. If it falls short, both countries may be pushed closer to eventually needing sovereign bailouts.
An audit released yesterday found Spanish banks would need up to €62 billion in extra capital to weather adverse circumstances.
Mr Monti, who presents himself as a mediator between France and Germany, has insisted for months that the euro zone must temper the German-led austerity drive with measures to foster growth.
That position is shared by Mr Hollande and Mr Rajoy, but when the Italian leader has tried to transform his pro-growth rhetoric into policy prescriptions for the euro zone his ideas have generally met a cool response from Dr Merkel.
He proposed on the sidelines of this week's G20 summit using the euro zone's rescue funds to buy the bonds of Spain and Italy in the secondary market to bring down their borrowing costs.
In an interview published in the Guardian, Mr Monti said individual euro zone countries face "escalating speculative attacks" unless a lasting solution to Europe's financial crisis is found at next week's summit .
Without a successful outcome at the summit, "there would be progressively greater speculative attacks on individual countries, with harassment of the weaker countries," Mr Monti said.
The attacks would be focused not only on those who had failed to respect EU guidelines, he said, but also on those like Italy, with high debt accumulated, according to the newspaper.
"A large part of Europe would find itself having to continue to put up with very high interest rates that would then impact on the states and also indirectly on firms. This is the direct opposite of what is needed for economic growth," Mr Monti said.
Aware of the popular shift against his government, Mr Monti said that, faced with creeping economic paralysis, "the frustration of the public towards Europe would grow" unless the summit failed to resolve the crisis quickly.
Mr Monti said euro zone leaders were working on a plan designed to halt the spread of debt contagion while satisfying Germany's refusal to sanction financial irresponsibility. The plan, he is cited as saying, was one of the "absolutely necessary" outcomes of next week's summit.
