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EU limps towards Greece summit

business Updated: Jul 18, 2011 21:57 IST
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Confusion over competing policy proposals reigned among officials and bankers on Monday as Europe struggled to put together a second bailout of Greece and prevent the region’s debt crisis from spreading.

French government spokeswoman Valerie Pecresse said she believed a summit of the eurozone’s 17 national leaders scheduled for Thursday in Brussels would agree on a rescue of Greece, supplementing a €110-billion ($154-billion) bailout launched in May last year.

German Chancellor Angela Merkel expressed confidance that the summit will take place this week and send a “strong signal to markets” that the euro can survive its biggest test to date.

“The government is working on all levels with all its strength on preparing for Thursday a good result, a decent result, a result that sends out a strong, and clear signal to the markets,” said Steffen Seibert, Merkel’s spokesman on Monday.

Germany has asked private investors to make a major contribution to Greece’s bailout fund.

However, it still remained unclear whether government officials and commercial bankers could agree on a way for private owners of Greek government bonds — banks, insurers and other investors — to contribute to the bailout by taking cuts in the face value of their holdings.

Officials are wrestling with a range of schemes for Europe’s bailout fund — the European Financial Stability Facility — to finance a voluntary buy back or swap of Greek debt to keep Greece away from defaulting.

ECB president Jean-Claude Trichet reiterated that the central bank, which owns billions of euros in Greek debt to keep Athens afloat, was opposed to any form of default. “The governments have been warned. If a country defaults, we will no longer be able to accept its defaulted government bonds as normal eligible collateral.”

The uncertainty hit global stock markets, which took a battering as investors fled for the security of other assets such as gold. The yellow metal rallied its all-time high of $1,600.4 an ounce. Brent crude fell $0.9 to $116.4 a barrel.
Some banking shares also took a fresh beating after the stress test results released late on Friday failed to address the potential for a Greek default.
Reuters, AP, AFP

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