Obama calls European leaders to urge action on debt crisis

US President Barack Obama called British, German and Italian leaders Wednesday to press the case for Europe to come up with an "immediate plan" to resolve the widening eurozone debt crisis. Obama, facing re-election in November and concerned that Europe's problems are dragging down the US economy, spoke of the need for action to bolster the single currency bloc and global growth. "The leaders agreed on the importance of steps to strengthen the resilience of the eurozone and growth in Europe and globally," White House spokesman Jay Carney said of Obama's telephone calls to German Chancellor Angela Merkel and Italian Prime Minister Mario Monti. They "agreed to remain in contact" ahead of the June 18-19 G20 summit in Mexico, Carney added. Earlier, Obama and British Prime Minister David Cameron said Europe had to come up with an "immediate plan to tackle the crisis and to restore market confidence," a Downing Street spokeswoman said. The exchanges came as pressure mounts on Europe's leaders to stabilise Spain's stricken banking system so as to avoid a costly bailout of the whole country and as Greece goes into June 17 polls with its eurozone future at stake. The European Central Bank meanwhile refused to offer recession-hit eurozone economies an easy-money boost, keeping interest rates steady at 1.0 percent. A hint of a rate cut to come, however, plus reports the US Federal Reserve might be ready for more stimulus action, buoyed stock markets, which posted strong gains, and the euro, which rose sharply against the dollar. European leaders are under intense pressure to try to resolve the crisis at a June 28-29 EU summit as Spain struggles to keep the debt wolves at bay and Germany holds its hardline stance that reform and austerity come before growth. Madrid is now asking for deeper eurozone integration so that European rescue funds can be directly pumped into lenders, thereby avoiding the Irish trap where saving the banks forced the country into a massive bailout. Spanish Finance Minister Luis De Guindos said Madrid has to move quickly, making a decision within the next two weeks on how to help its lenders who are struggling to raise 80 billion euros ($100 billion) to shore up their books. Europe "must help nations in difficulty," Spanish Prime Minister Mariano Rajoy said Tuesday as he called for a list of EU reforms viewed with suspicion by Germany including deposit guarantees, a banking union and eurobonds. The proposal gaining the most traction outside Germany is to integrate the eurozone's national banking systems, which would sever the link between banks and sovereign finances. But powerhouse Germany resisted the pleas, saying whatever help the EU can provide to an increasingly desperate looking Madrid should come from the tools, and according to the rules, already in place. German government spokesman Steffan Seibert said the reforms asked for by Rajoy required long-term changes beforehand, reiterating that only governments can apply for cash from the European bailout funds. "These instruments must be applied for by governments ... whether a government wishes to apply is purely a matter for the government," Seibert said. A leading member of Chancellor Angela Merkel's coalition, Free Democrat Christian Lindner, sarcastically called the banking union idea "a new, admittedly creative, way to tap German solvency." Merkel also signaled she is no mood for a quick compromise, praising the virtues of German perfectionism as a national strength. "Because we are not easily satisfied, we have been successful in many areas," Merkel told a citizen's forum on Germany's future. Spain has so far refused to seek financial assistance from the European Union that would come to the government with tough strings and a politically humiliating austerity programme attached. But some kind of rescue for Spain appears to be emerging and French Finance Minister Pierre Moscovici said EU partners were ready to "mobilise very rapidly" to come to Madrid's assistance. According to the German daily Sueddeutsche Zeitung, a compromise under discussion could see European Union aid paid to the Spanish state-backed Fund for Orderly Bank Restructuring (FROB). Madrid in turn would push through mergers or closures of weakened Spanish banks, the German newspaper said Wednesday. The report said this course would preserve Madrid's sovereignty and uphold the German position that EU funds should be paid only to public institutions. ECB chief Mario Draghi sought Wednesday to calm fears, saying the eurozone debt crisis is "far" from as bad as the global market meltdown in the wake of the 2008 collapse of US investment bank Lehman Brothers "We are rightly alarmed but I would say that we are still far away from that situation," he said. Draghi said some of the current problems "have nothing to do with monetary policy," and urged European leaders to set out a vision for where they want eurozone to go at their summit later this month. London stocks jumped 2.36 percent Wednesday, Frankfurt 2.09 percent, Paris 2.42 percent, Madrid 2.41 percent and Milan 3.50 percent. Wall Street was showing gains of around 2.0 percent at 1900 GMT. The European single currency rose sharply to $1.2553 from $1.2450 late Tuesday.