Crisis won't spread, say EU leaders

Parliaments approve Greek aid even as euro continues plunge

EUROPEAN leaders yesterday sought to convince fearful markets that the Greek debt crisis won't spread to other countries and derail the continent's wobbly shared currency and hesitant economic recovery.

France, Italy and Portugal approved their share of a 110 billion euro (S$195 billion) bailout to keep Greece from imminent default as the 16 leaders from countries using the euro headed for an evening summit in Brussels.

Germany's contribution awaited only a presidential signature, while Spain's government approved its share by decree with formal parliamentary approval expected next week.

The meeting - initially called to sign off on the bailout and draw lessons for the future - faces the challenge of urgent crisis management, after the euro dropped to its lowest level in 14 months and bond markets dumped Greek debt.

EU leaders have insisted for days the Greek financial implosion was a unique combination of bad management, free spending and statistical cheating that doesn't apply to any other eurozone nation, such as troubled Spain or Portugal.

They said the bailout should contain the problem by giving Greece three years of support and preventing a default when it has to pay 8.5 billion euros in bonds coming due on May 19.

Again yesterday, European leaders were almost desperately trying to talk away the problems.

Agreement on rescue for Greece 'will be a demonstration of Europe's force, of solidarity', French Prime Minister Francois Fillon said after a meeting with Portuguese Prime Minister Jose Socrates. 'We will protect Greece and reinforce the stability of the eurozone,' he said.

The markets have taken little heed. Stocks, Greek bonds and the euro plunged even yesterday.

Along with the eurozone meeting, the G-7 finance ministers will hold a teleconference yesterday on the crisis, according to Japan's finance minister.

And on top of the eurozone summit, key leaders like France's Nicolas Sarkozy, German Chancellor Angela Merkel and ECB president Jean-Claude Trichet will huddle ahead of time seeking a common strategy to soothe the markets.

A French official said no completely new decisions were to be expected from yesterday's meeting but that some emergency measures could be discussed. He said the leaders would be looking at ways to prevent other countries, including Spain, Portugal and Ireland, from coming under pressure. -- AP

Source: Business Times, 8 May 2010