Finance ministers of all 27 EU countries are meeting in Brussels today to thrash out an emergency package to calm financial markets spooked by the Greek debt crisis ahead of Monday's market openings.
The size of the emergency fund hasn't been disclosed, but the French President, Nicolas Sarkozy, said yesterday that the package – the European Stabilisation Mechanism – would be in place by tomorrow, before Europe's financial markets open for trading. Mr Sarkozy said that the measures – which could see up to €70bn being used to prop up the currency – would show that "Europe will be ready to defend the euro."
Germany's Chancellor, Angela Merkel, who faces regional elections today, also gave her full backing after getting her government's approval for the Greek bail-out plan. Although eurozone officials have been talking about setting up an emergency fund following Greece's debt problems, it is only now that politicians are taking the lead to calm the worst of the market's fears.
The intervention of the US President, Barack Obama, on Friday, expressing concern at the spread of the Greek contagion, added urgency as borrowing costs for some states soared and the euro plummeted against the dollar.
The European Council President, Herman Van Rompuy, said: "We face a serious situation. It is about responsibility and it is about solidarity. We will face this situation together."
He added that eurozone leaders agreed to accelerate planned budget-deficit cuts. The leaders also want the European Commission, the EU's executive arm, to enforce budget rules more firmly. But many investors are concerned that this is too little, too late. Many warn that the crisis can not be solved unless the European Central Bank changes its policy and goes into the bond markets to buy up government debt. The ECB's president, Jean-Claude Trichet, is under pressure to launch a quantitative easing scheme to underpin government borrowing, and allow banks more access to cash.
Stock markets closed sharply lower on Friday on fears of a secondary banking crisis. In Britain, the FTSE 100 closed down 2.6 per cent on the day to 5123. In Europe, shares finished down at a six-month low while in Asia, the Shanghai index was down 6.8 per cent.Reuse content