Barroso confident leaders will solve euro-zone debt crisis

European Union Commission President Jose Manuel Barroso today defended the political will of EU leaders to resolve the euro-zone debt crisis, despite concerns that they seem unable to halt a slide back into recession and avoid a fresh banking crisis.

"A lot has been done and we are in the process of completing a very complex architecture. I can tell you very honestly I believe there is a strong determination of the leaders of the euro zone and the members states to support the financial stability of the euro zone and the euro," he added.

The EU, with the backing of the International Monetary Fund, have set up a €440 billion ($621 billion) stability fund to help weaker member countries, fight financial market contagion and prevent a crisis of confidence among banks.

However, markets have questioned the EU's resolve to see this plan through, with doubts over political support for it in Germany, Europe's biggest economy, and over the ability of major borrower Italy to implement an austerity package.

Barroso, in Australia for meetings with the government ahead of a Pacific Islands summit in New Zealand this week, said fiscal consolidation was Europe's most serious challenge.

He said the euro remained a stable and credible currency, and leaders would do whatever was needed to ensure financial stability in the euro zone.

"The euro remains an extremely important, credible, stable currency," he said.

"European leaders, the IMF, and countries providing most of the support will do whatever it takes, whatever is necessary, to keep financial stability in the euro zone."

* Governments in and beyond the eurozone need to start delivering on fiscal consolidation and improve competitiveness, the German Finance Minister Wolfgang Schaeuble said.

He said increasing debt now will stunt rather than stimulate growth in the long run, and despite political pain, countries with high levels of debt and deficits need to remove "structural hindrances in their economies."

Schaeuble defended the implementation of harsh austerity measures in strained western economies in an editorial in the Financial Times.

"Only this course of action can lead to sustainable growth as opposed to short-term volatile bursts or long-term economic decline," he wrote.

"These efforts will inevitably bear fruit, but it will not come overnight. This time, we will have to take the longer view. For too long we have forsaken long-term gains for short-term gratification with the result we all know."