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European Union 'needs strong message' on Greece debt Eurozone leaders warned over seriousness of Greek debt
(about 3 hours later)
French Finance Minister Francois Baroin has stressed the need for Europe to send a "strong message" that it will act decisively to contain the Greek debt crisis. Eurozone leaders must solve the Greek debt crisis or else the "negative consequences" will be felt across Europe and beyond, the European Commission president has warned.
He said Thursday's summit of European leaders should pave the way for further assistance to the debt-ridden country. Jose Manuel Barroso called the situation "very serious".
The International Monetary Fund has called on Europe to take strong action. On Thursday, the 17-strong eurozone will hold an emergency summit to try to find a solution.
President Barack Obama has also spoken to German Chancellor Angela Merkel about the debt crisis. Earlier, French Finance Minister Francois Baroin had also stressed the need for Europe to act decisively.
"They agreed that dealing effectively with this crisis is important for sustaining the economic recovery in Europe as well as for the global economy," a White House statement said. 'Strong message'
This echoed comments made by the IMF on Tuesday, in which the fund said it would be "very costly not just for the eurozone but for the global economy to delay tackling the sovereign crisis". Speaking at a news conference, Mr Barroso said: "Nobody should be under any illusion: the situation is very serious. It requires a response - otherwise the negative consequences will be felt in all corners of Europe and beyond."
Mr Baroin's comments came as European banking shares recovered strongly from sharp falls earlier this week. Mr Barroso has also said the minimum the summit must achieve is provide clarity on measures to ensure the sustainability of Greek public finances, the feasibility of public sector involvement in any aid package and more flexibility in existing European bail-out funds.
In France, Societe Generale was up 5.5%, with BNP Paribas and Credit Agricole both climbing more than 4%. In Germany, Commerzbank climbed almost 5%, with Deutsche Bank gaining 3.5%. Earlier on Wednesday, French Finance Minister Mr Baroin said: "This meeting at the highest decision-making level should allow us to take a further essential step to establish the conditions of a new package for Greece, that will make Greece's debt more bearable."
Banking shares fell sharply on Monday on debt fears and concerns about the credibility of last Friday's Europe-wide bank stress tests.
Debt rollover
All eyes are now on Thursday's summit in Brussels, with French President Nicolas Sarkozy travelling to Berlin to discuss the debt crisis with Mrs Merkel ahead of the meeting.
"This meeting at the highest decision-making level should allow us to take a further essential step to establish the conditions of a new package for Greece, that will make Greece's debt more bearable," Mr Baroin said.
"A strong message should be made tomorrow.""A strong message should be made tomorrow."
European Commission President Jose Manuel Barroso said the minimum the summit must achieve is provide clarity on measures to ensure the sustainability of Greek public finances, the feasibility of public sector involvement in any aid package and more flexibility in existing European bail-out funds. However, divisions appear to remain, and Germany's Chancellor, Angela Merkel, has played down the chances of Thursday's summit resolving Greece's debt crisis.
Reports also suggest leaders will discuss a tax on banks. Belgian Finance Minister Didier Reynders was quoted as saying such a tax "could be part of the solution, but it is not easy to put into practice" by Belgium's Le Soir newspaper.
However, divisions remain among European leaders, and Mrs Merkel has played down the chances of Thursday's emergency eurozone summit resolving Greece's debt crisis.
Mrs Merkel wants private investors to contribute to any aid package by agreeing to roll over loans they have made to Greece.Mrs Merkel wants private investors to contribute to any aid package by agreeing to roll over loans they have made to Greece.
However, the European Central Bank disagrees, arguing that such a rollover would constitute a default in the eyes of the international credit ratings agencies and, as such, would undermine investor confidence and the euro itself.However, the European Central Bank disagrees, arguing that such a rollover would constitute a default in the eyes of the international credit ratings agencies and, as such, would undermine investor confidence and the euro itself.
The EU and the IMF have been discussing a second aid package for Greece, expected to be a similar amount to the 110bn euro ($156bn; £97bn) package agreed last May. President Barack Obama has also spoken to Mrs Merkel about the debt crisis.
"They agreed that dealing effectively with this crisis is important for sustaining the economic recovery in Europe as well as for the global economy," a White House statement said.
The EU and the International Monetary Fund (IMF) have been discussing a second aid package for Greece, expected to be a similar amount to the 110bn euro ($156bn; £97bn) package agreed in May last year.
On Tuesday, the IMF warned that a failure to agree on an effective solution would be "very costly not just for the eurozone but for the global economy to delay tackling the sovereign crisis".
Reports have also suggested that the leaders will discuss a tax on banks.
Belgian Finance Minister Didier Reynders was quoted as saying such a tax "could be part of the solution, but it is not easy to put into practice" by Belgium's Le Soir newspaper.