GEORGE Osborne last night claimed the eurozone was "inching towards the comprehensive solution" it needed as Germany appeared finally ready to allow bailout funds to buy Spanish and Italian debt to lower their borrowing costs.
The Chancellor's comments came as speculation was growing that a new Greek government would be formed between the centre right New Democracy, the socialist Pasok and the smaller Democratic Left party.
The move would give the coalition a majority of 29 seats in the Greek parliament.
As pressure piled on the eurozone countries at the G20 in Mexico to come up with a grand plan to solve the two-and-a-half- year debt crisis, Mr Osborne insisted it was necessary for the richer countries such as Germany and the Netherlands to "spend some of their resources in propping up the weaker countries of the eurozone".
He added: "There are signs the eurozone is moving towards richer countries standing behind their banks and standing behind the weaker countries."
The suggestion being mooted at Los Cabos yesterday was for the eurozone's £600 billion bailout fund to be used to drive down borrowing costs in Spain and Italy, which have recently hit record highs.
Francois Hollande, the French President, said their current rates were "unacceptable" and added: "We must show a much faster capacity for action."
Use of the bailout fund would be regarded as a move towards the creation of eurobonds – sharing debt across the single currency area.
Mr Osborne, who famously said last autumn there were just three weeks to save the euro, moderated his outlook, saying people should not expect any one summit to solve the eurozone's problems.
However, he noted how people were now realising individual measures for individual countries like Greece and Spain were not enough.
He said: "These are systemic problems in the eurozone which require a systemic answer and we need to see measures from the eurozone that help bring borrowing costs down, that help ensure that there are common resources transferred from richer countries to poorer countries, that the whole eurozone stands behind the banks of the eurozone."
Today in a speech, Ed Miliband will brand the G20 a failure.
He will say: "This G20 summit should have marked a decisive shift towards jobs and growth, which is vital if we are to get deficits down.
"Unfortunately, this has not happened because too many governments, our own included, seem to think more of the same is the answer.
"The result is a summit that appears to offer no progress for Europe and no global plan for jobs and growth. It is a summit of division, when the world needs unity. And a summit of inaction when people, in Britain and across the world, are crying out for action."
A draft G20 communique spoke of the 17 eurozone members promising to "take all necessary policy measures to safeguard the integrity and stability of the area".
Under pressure from financial markets and anxious world leaders, the eurozone agreed to move towards creating a federal banking system.
Earlier, Jose Manuel Barroso, President of the European Commission, caused something of a stir when he accused the US of starting the financial crisis.
Asked by a Canadian journalist to explain why North Americans should "risk their assets to help Europe", he replied: "Frankly, we are not here to receive lessons in terms of democracy or in terms of how to handle the economy. This crisis was not originated in Europe."
Mr Barroso added the financial crisis had been caused by "unorthodox" practices, which "originated in North America".
In Greece, Antonis Samaras, leader of the centre right New Democracy party, which narrowly won Sunday's rerun poll, continued to hold urgent talks to form a coalition with Pasok and possibly the Democratic Left party.
Evangelos Venizelos, the Pasok leader, said his party would "whole-heartedly" support a government led by New Democracy and added: "As we stand now, it could be formed by midday tomorrow."
Earlier, Mr Samaras said he would have to make some changes to the £100bn bailout agreement "to relieve the people of crippling unemployment and huge hardships".
Brussels officials suggested Greece and its international lenders would renegotiate the deal as circumstances had changed.
However, German Chancellor Angela Merkel said: "The new Greek government has to implement the commitments entered into by the country.
"The programme framework has to be kept."
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