People spray champagne as they celebrate the New Year on the Trocadero square in front of the Eiffel Tower in Paris early on January 1, 2012.

Story highlights

French president said the gravest crisis Europe has faced since the second world war "is not over"

German chancellor told German voters "next year will no doubt be more difficult than 2011"

The president of Europe's third-largest economy urged Italians to make sacrifices

Spiraling borrowing costs forced political changes in Italy and Spain, and threatened the euro

CNN  — 

Europe’s leaders warned 2012 was likely to be tougher than 2011, when spiralling borrowing costs forced political change in Italy and Spain and threatened the survival of the euro.

In a sombre address on national television Nicolas Sarkozy, president of France, said the gravest crisis Europe has faced since the second world war “is not over” and Angela Merkel, German chancellor, told German voters “next year will no doubt be more difficult than 2011”.

The euro crisis in 2011 forced borrowing costs higher for Italy and Spain and led to the dismissal of Silvio Berlusconi’s centre-right government in Rome and the fall of the Socialist administration of José Luis Rodríguez Zapatero in Madrid.

It also undermined sentiment in the euro which had a second consecutive year of losses against the dollar and fell to its lowest level in a decade against the yen.

Speaking on national television on Saturday, Ms Merkel said Europe was experiencing its “harshest test in decades” but would ultimately be made stronger by the crisis.

Mr Sarkozy, who is facing a tough re-election campaign later this year, said French voters were more anxious at the end of the year than they were at the beginning.

“This extraordinary crisis, without doubt the gravest since the second world war, is not over … you are ending the year more anxious for yourselves and your children.”

Europe’s political leaders will begin talks later this month to amend the intergovernmental pact agreed by all 27 members of the European Union, except the UK, at a summit in Brussels last month.

Mr Sarkozy and Ms Merkel are due to meet on January 9 to discuss a series of amendments to the proposals, including the creation of a “road map” for commonly-issued eurozone bonds in a new European treaty on fiscal discipline.

The state of Italy’s public finances were at the centre of Giorgio Napolitano’s New Year address. The president of Europe’s third-largest economy urged Italians to make sacrifices to rescue the country’s public finances.

“Sacrifices are necessary to ensure the future of young people, it’s our objective and a commitment we cannot avoid,” he said.

“No one, no social group, can today avoid the commitment to contribute to the clean-up of public finances in order to prevent the financial collapse of Italy.”

Italy, the world’s third-largest bond market, is seen by many investors as the barometer for the eurozone debt crisis and faces a crucial opening to the year with auctions of more than €100bn in the first quarter alone.

Mario Monti, the new prime minister of Italy, said in his end-of-year address last week that Italy had hauled itself back from the “edge of the precipice” but he said more needed to be done to reform labour markets and the service sector to restore competitiveness to the stalling economy.

In Greece, Lucas Papademos, the new technocratic prime minister, also warned of a difficult year ahead.

“We have to continue our efforts with determination, so that the sacrifices we have made up to now won’t be in vain,” he said in a televised address on Saturday.