EU mechanism to stop Greek contagion

BELGIUM: European Union officials were working out the details of a financial support mechanism on Saturday to prevent Greece’s debt turmoil spreading to Portugal and Spain, ready for approval by EU finance ministers on Sunday.

The leaders of the 16 countries that use the single currency said on Friday after talks with the European Central Bank and the executive European Commission that they would take whatever steps were needed to protect the stability of the euro area. Both Italian Prime Minister Silvio Berlusconi and French President Nicolas Sarkozy cancelled trips to Moscow to mark the anniversary of the end of World War Two in order to continue consultations over the crisis, though German Chancellor Angela Merkel said she would still go.

President Barack Obama said he was “very concerned” about Greece’s debt turmoil and stressed that stabilising the country was vital for both Europe’s and the United States’ economic wellbeing.

Financial markets have been pounding euro zone countries with high deficits or debts as well as low economic growth, threatening to force Portugal, Spain and Ireland into a position where, like Greece, they would need to seek financial aid.

A Portuguese government source said Lisbon had promised its European Union counterparts to cut the country’s budget deficit further than planned this year, to 7.3 percent of GDP instead of 8.3 percent, by suspending some public works including a new international airport for the capital.

Brussels, Sunday, Reuters