The euro zone faces a systemic crisis that will need a stronger commitment from all countries to resolve and a fragmented currency union is no solution, European Commission President Jose Manuel Barroso said on Wednesday.
The 17-nation bloc has entered what may be a critical phase of the two-year-long sovereign debt crisis with France, the region's second largest economy, now the target of intense bond market pressure, with its borrowing costs soaring dramatically.
Barroso said no euro zone nation was immune from market attacks and the bloc had to act with strength and decisiveness to show investors it could handle the crisis.
We are indeed now facing a truly systemic crisis that requires an even stronger commitment from all and that may require additional and very important measures, Barroso told the European Parliament in Strasbourg.
We will not make the euro stronger through the fragmentation of the European Union, he said.
Barroso said there needed to be deeper economic integration among euro zone members that did not put the remaining 10 members of the European Union at a disadvantage.
Reinforcing the governance of the euro is also reinforcing our union, Barroso said.
There should not be any divide between the current 17 member states on one side and 10 on the other. Most of them, almost all of them, have a vocation to join the euro.
Despite resistance from non-euro zone member states such as Britain, Barroso said changes to the EU's rulebooks would be needed to ensure a deeper union. He called for more solidarity, but acknowledged that changing the EU treaty was no way out of the immediate debt debacle and would take time.
In the future, we will need to go even further on strengthening integration. And this will require Treaty changes, Barroso said.
He said new measures to tighten surveillance of the budgets of euro zone countries and their economic targets would come into force as early as next month.
Barroso also warned that a two-year economic recovery had run out of steam, echoing other senior European officials, and said growth would be low at best while unemployment would remain at around 10 percent for the next two years.
The euro zone's economy grew just 0.2 percent in the third quarter from the second, the EU said on Tuesday, and economists say the bloc is almost certainly heading for a recession.
Our challenges are of a great magnitude, he said.
(Reporting by Jan Strupczewski and Luke Baker; writing by Robin Emmott)