9 May 2010

EU to act by Monday to prevent spread of Greek crisis

5:12 pm on 9 May 2010

Europe's leaders hope a new crisis fund for debt-ridden euro countries will send a reassuring message before world sharemarkets reopen for business on Monday.

The fund would reportedly have up to 70 billion euros at its disposal to guarantee loans and be available to the 16 member states in the eurozone reports the BBC.

Many leaders want it agreed before markets open on Monday to prevent investor fears over the euro spreading.

But some countries, including the UK, oppose aid on such a large scale.

Euro leaders meet

On Friday, the leaders of 16 countries that use the single currency approved a deal to lend 110 billion euros ($US139 billion) to Greece over three years.

After talks with the European Central Bank and the European Commission, euro zone leaders said on Friday that they would take whatever steps were needed to protect the stability of the euro area.

All 27 EU countries will be asked to agree a financial mechanism to ring-fence the Greek crisis before the markets open for the new week.

Details will be agreed on Sunday and put into place immediately.

German Chancellor Angela Merkel said there was "no more time" to reform market regulations.

Fresh selling swept global stock markets on Friday amid investor fears that the Greek debt crisis could halt the global economic recovery.

In return for the three-year loan, Greece must cut severely its public spending to reduce its budget deficit.

EU rules highlighted

European Council president Herman Van Rompuy said the eurozone leaders also agreed to reinforce the rules governing their own national budgets in an effort to prevent any future financial crisis.

Mrs Merkel and French President Nicolas Sarkozy said they want rules that limit government spending to be enforced.

As a condition of entering the eurozone, members are supposed to keep their public sector deficits under 3% of their gross domestic product.

Greece's deficit surpassed 13% of its GDP.