EUROZONE: SPAIN SEEKS HELP FOR ITS BANKS

G7 finance chiefs pledge to help Europe look for ways to resolve crisis

OTTAWA — After months of political rhetoric and fiscal sabre rattling, European leaders are being prodded by the world’s biggest countries to finally tackle the region’s debt problems before it is too late.

With Spain finally admitting it needs help to save its banking sector, finance chiefs of the Group of Seven industrialized nations on Tuesday pledged to help Europe look for ways to resolve its fiscal crisis.

That came in a conference call Tuesday by G7 finance ministers and central bankers, which included Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney.

The U. S. Treasury, which chaired the meeting, said in a statement that the G7 discussed “progress toward a financial and fiscal union in Europe” and agreed to monitor developments closely. No other details on the talks were released.

For its part, Canada issued a statement after the call echoing those goals but also offering no firm action.

Prime Minister Stephen Harper, in an interview with CBC in London, said: “I don’t want to sound too alarmist, but we are kind of running out of runway here. … And in terms of structure of the eurozone and in terms of addressing these problems, we do need to see a broader game plan.

“We just can’t constantly deal with short- term problems. We’ve actually got to have a plan to make this a stable situation.”

Avery Shenfeld, chief economist at CIBC World Markets, said at least Canada and the United States “are encouraging the stronger European countries to step in and play a greater role in financing sovereign debt and bank recapitalization in the weaker countries.”

Spain isn’t the only country in the 17- country currency zone unable to crawl out of its debt hole. Greece, Ireland, Portugal and Italy have all struggled with German- promoted austerity measures that have zapped economic growth and drained national banks.

The deep cost- cutting programs have divided the eurozone, with France electing prospending governments and Greek voters leaning that way in their election campaign — much to the disgruntlement of Angela Merkel, the leader of Germany, Europe’s economic powerhouse.

Philip Guirlando, an international studies expert at Queen’s University, said European leaders will need to take drastic measures to solve the region’s problems.

“The only thing that will save the eurozone is instruments that will make German taxpayers liable for all eurozone debt,” Guirlando said. “In return, Germany wants veto power over eurozone national budgets. There is very little political will for that kind of German dominance over the continent.”

Earlier Tuesday, Spain’s Treasury Minister Cristobal Montoro warned that the country’s banks — already laden with debt since the real estate bubble burst in 2008 — have effectively been pushed out of the markets due to the high cost of borrowing.

Spain — the fourth largest economy in the eurozone

We just can’t constantly deal with short- term problems. We’ve actually got to have a plan to make this a stable situation. STEPHEN HARPER CANADIAN PRIME MINISTER

—” has been trying to avoid being pulled into the same sort of tightly constrictive rescue packages that Greece, Ireland and Portugal signed on to,” said CIBC’s Shenfeld. “But it’s likely to come to that, quite soon.”