Pressure grows on Europe to do more to help euro

By Pan Pylas

Associated Press

Published: Wednesday, Sept. 14 2011 12:00 a.m. MDT

Burnt euro notes, burnt because they were unusable for various reasons, are displayed in the money museum of German Bundesbank in Frankfurt, Germany, Wednesday, Sept. 14, 2011, with the German word "Ungueltig" or invalid cut into them. A top lawmaker from German Chancellor Angela Merkel's junior coalition partner is defending comments by his party's leader that an "orderly insolvency" for Greece should be considered in the future if Athens cannot get its finances in order. The comments by Free Democrats leader Philipp Roesler roiled markets earlier this week. They prompted Merkel to say she saw no quick solutions to Greece's problems and caution that "everyone should very carefully weigh their words."

Michael Probst, Associated Press

ATHENS, Greece — International pressure grew on Europe to find a lasting solution to the debt crisis that is shaking global financial markets, as the leaders of Greece, Germany and France held talks Wednesday in an emergency teleconference.

U.S. Treasury Secretary Timothy Geithner said Europe's leaders know they've "been behind the curve" but he also sought to soothe investors, claiming the eurozone governments understood the severity of the situation and have the financial firepower "to do what it takes to hold this thing together."

Fears that Greece was heading rapidly towards a chaotic default have roiled markets for days, both across the 17-nation eurozone and globally.

Many investors are convinced Greece will not be able to fix its public finances under its current economic plans. Interest rates on the country's 10-year government bonds soared to new record highs hitting the alarming level of 25.3 percent on Wednesday, more than 23 points higher than the German equivalent.

German Chancellor Angela Merkel spoke out this week to calm the market jitters and to distance herself from her vice chancellor, Philipp Roesler, and others who suggested a Greek bankruptcy was possible.

Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou were discussing the situation Wednesday evening, after a government meeting Papandreou called to address urgent fiscal reforms. The finance ministers from the wider 17-nation eurozone meet Friday in Poland.

It was unclear whether there would be statements after Wednesday's teleconference from any of the three countries involved. Indications as to how the talks went would likely affect markets.

Hours before the talks, Sarkozy and his prime minister "with a single voice reaffirmed France's determination to put everything in place to save Greece," French government spokeswoman Valerie Pecresse said of a Cabinet meeting in Paris.

Sarkozy wants the call to focus on "the need for efforts in return and commitment from Greece," she said.

The main fear of a Greek bankruptcy is that it could destabilize other financially troubled European countries such as Portugal, Ireland, Spain or Italy. It would also have a knock-on effect on banks, many of which are large holders of Greek government bonds. Moody's on Wednesday downgraded the credit ratings of two French banks, Societe Generale and Credit Agricole.

"We are confronted with the most serious challenge of a generation. This is a fight for the jobs and prosperity of families in all our member states," European Union Commission President Jose Manuel Barroso told the European Parliament in Strasbourg, France. "This is a fight for the economic and political future of Europe. This is a fight for what Europe represents in the world. This is a fight for European integration itself."

The International Monetary Fund, which is providing Greece with funds in a €110 billion bailout along with eurozone countries, also held an informal board meeting on the situation Wednesday. The meeting was not a "decision-making" one, the IMF said in a statement, but was held to update board members of the latest developments.

Separately, World Bank head Robert Zoellick criticized the 17 eurozone countries for not taking tough enough actions to prevent the crisis.

"The global economy has entered a new danger zone with little running room as European countries resist difficult truths about the common responsibilities of a common currency," Zoellick said.

Geithner, who joins eurozone finance ministers this weekend in a meeting in Poland, stressed European governments must show they "stand behind" the financial system so it can fund and finance the economic recovery.

"I think they recognize that they're going to have to do more to earn the confidence of the world," Geithner said on American news channel CNBC.

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