Eurozone nations defend currency union

BRUSSELS - Eurozone finance ministers defended the euro as a "credible" currency on Tuesday, despite its slide to four-year lows against the dollar, as they sought to tame the fears that have gripped financial markets in recent weeks.

Investors fear that as European nations make painful spending cuts to rein in their swelling debt, growth will be stifled for years to come. There are also concerns that governments' rescue efforts for debt-laden EU countries, combined with the European Central Bank's move to buy government bonds, could cause inflation to rise.

Those worries have helped fuel the euro's fall to the lowest level against the dollar since April 2006 and hiked the price of gold, traditionally a safe haven when markets lose faith in other assets.

Jean-Claude Juncker, who leads regular talks between the ministers, tried to reassure investors.

"We trust that the euro is a credible currency," he said, reading out a statement released early Tuesday after a meeting of finance ministers of the 16 countries that use the euro. "Price stability has been fully maintained in the euro area for 11 years and will be maintained in the years to come. This is a major feature of the euro and a major asset for investors," he said.

The eurozone meeting came ahead of a Tuesday session of finance ministers from all 27 European Union members that are set to agree on new rules to regulate hedge funds.

The ECB moved ahead Monday with a controversial program to buy government bonds - something it has previously vowed not to do because it can effectively mean that the bank is backing government moves to print money. It said it will borrow $20.4 billion Tuesday to offset the bond purchases. It did not specify the amount of bonds it has bought or intends to buy.

Germany called earlier on other countries that use the euro to swiftly cut budget deficits as the only way Europe's battered currency union can restore confidence and climb out of a debt crisis that threatens to wreck it.

German Finance Minister Wolfgang Schaeuble told reporters that getting deficits down was "the only task that everyone has to fulfill for himself and for all."

Germany, Europe's largest economy, is providing the largest chunk of a 110 billion bailout for Greece and a 750 billion 1 trillion rescue package for other euro nations - and voters and politicians there have bridled at bailing out free-spending governments.

However, some EU nations may need to reduce debt less quickly because rapid cuts to public spending could see their economies grind to a halt. Juncker said eurozone nations have asked the EU's executive commission to check how "the efforts of fiscal consolidation on the economic recovery" would affect each country.

EU Economy Commissioner Olli Rehn said the first payment of 20 billion to Greece would be transferred to Athens on Tuesday - 14.5 billion from EU nations and 5.5 billion from the International Monetary Fund.

Germany wants to propose stricter budget rules that would require Portugal and other vulnerable countries to make big spending cutbacks - and remove the need for them to seek a bailout from other countries.

Schaueble wants to put his proposals to a Friday meeting of eurozone finance ministers with EU President Herman Van Rompuy, who will draft a report by October on the kind of reforms that EU nations should make.

The EU already has rules against running up deficits and debt, but they have been widely ignored. On paper, the so-called Stability and Growth Pact called for heavy fines for violators but the EU never imposed them.

AP business writers Carlo Piovano in Brussels and Pan Pylas in London contributed to this story.