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EU official says region will avoid recession

CANBERRA, Australia (AP) — The European Union will avoid slipping into recession and is doing all it can to tackle the region's debt problems, a top official said Monday.

European Commission President Jose Manuel Barroso, who is in Australia on his way to a meeting of South Pacific states, said the 27-nation EU and the euro common currency are resilient and the region will continue to grow, albeit modestly.

"We don't anticipate a recession in Europe," Barroso told reporters after a meeting with Australian Prime Minister Julia Gillard and senior ministers. "The latest forecast by the European Commission shows that there will be growth — modest growth, it's true."

"The European Union and euro are strong and resilient and we are doing all it takes from tackling the underlying budget problems to strengthening the governance of the euro zone, from tighter financial regulation to improving our overall competitiveness," he said.

Disagreements over Greece's massive budget deficits and how to make up for the funding shortfalls led international debt inspectors to suspend their review and leave Athens last week, as Greek Finance Minister Evangelos Venizelos warned an even deeper recession in his country will hurt its deficit-cutting efforts.

The unexpected departure on Friday of the debt inspectors — officials from the European Commission, the European Central Bank and the International Monetary Fund — marked yet another occasion of conflict between international institutions demanding greater reform efforts and a government and country that are reaching their limits.

But Barroso, who heads the EU's executive arm, said it would be premature to make an assessment now on the Greek government's latest efforts to tackle debt.

Greece's troubles are being worsened by a slowing global economy, with growth tapering off in major economies such as Germany, China and the United States.

World business leaders and finance experts gathered in Italy for the annual Ambrosetti Forum at the weekend offered a downbeat assessment of the global economy — with several predicting another recession due to a calamitous cocktail of sluggish growth, eurozone dysfunction, and financial market volatility.

The Australian government has criticized a lack of political will in Europe to tackle serious economic reform. Deputy Prime Minister Wayne Swan co-wrote an article published in The Financial Times newspaper last month that said a crisis in confidence in policy makers posed a greater challenge than any economic barrier. But Gillard on Monday praised Europe's efforts to tackle its sovereign debt crisis.

"Australia certainly welcomes the important steps European authorities have taken to address sovereign debt problems and to press on with reform," she told reporters.

"We know and understand these are difficult decisions, but we know that tough decisions are needed to stabilize financial markets," she said.

Yet Gillard said she was "not on the same page" with Barroso on the need for a financial transactions tax on the European banking industry. The proposal will be put to a summit of the Group of 20 rich and developing nations in Cannes, France, in November.

While in Australia, Barroso and Gillard agreed to expedite negotiations on a treaty that would formalize Australia's relationship with the EU.

They also agreed that officials will begin talks about how the EU's carbon emissions trading scheme can be linked with Australia's scheme which is scheduled to come into force in 2015.

Barroso is traveling to Auckland, New Zealand, to attend an annual South Pacific leaders' forum this week.

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