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Text by News Wires

Latest update : 2010-02-11

France and Germany are leading efforts to offer debt-ridden Greece a path to recovery in anticipation of an EU summit on Thursday as thousands of Greek civil servants strike against the government's austerity plan.

AFP - Greek Prime Minister George Papandreou appealed for "psychological" and "political" support from the rest of Europe on Thursday ahead of an EU summit expected to commit billions to Greece's battle against a debt crisis.

Amid fears that the debt contagion could hit the entire euro currency zone, European Commission chief Jose Manuel Barroso called on all nations to ensure the continent's financial stability and on Greece to take extra cost-cutting measures.

The European Union's Spanish presidency announced that countries will help Greece tackle its debt crisis. "We have to support Greece, that's clear, and it's Europe and the Eurogroup which will do it," said Spanish Prime Minister Jose Luis Rodriguez Zapatero, whose country is among those also suffering from major deficit problems.

Greek Prime Minister Papandreou told Le Monde newspaper that Athens "needs psychological and political support from Europe," and added that if market speculation continues "then this is not a matter for Greece, but for the eurozone and Europe."

The start of the one-day summit was pushed back because of snow that has hit much of Europe.

But in pre-summit meetings with leaders, the EU commission chief called on eurozone nations to "safeguard financial stability", a commission source said. He also said that Greece must take additional measures to cut its huge public deficit.

According to diplomats, "a certain number of countries" will present a declaration backing Greece.

This is likely to take the form of statement of general principle. More concrete details are likely on Monday when finance ministers from the 16 countries that use the euro meet in Brussels.

Market analysts still want to see hard figures. Dariusz Kowalczyck, chief investment strategist at SJS Markets Ltd in Hong Kong, said investors are concerned "that the EU summit will not end with a specific plan to help Greece but merely with a political declaration."

European socialists are concerned that strings attached to possible government loans will leave lasting scars.

"We have spent a lot of taxpayers money bailing out the banks, now let’s help those same hard working people by creating jobs," said Poul Nyrup Rasmussen, president of the Party of European Socialists, in a statement late Wednesday.

"They did not cause this financial crisis."

Germany and France were working together on the message of political support for Athens, a French diplomatic source said.

Among the options being considered are bilateral loans to Greece from some eurozone countries, the creation of credit lines or government guarantees to underwrite Greek bond issues, one diplomatic source said.

There were differences among EU member states over whether the International Monetary Fund should be called in. Some euro nations fear this would be a political catastrophe for the single currency.

Paris and Berlin want the European declaration to be limited to objectives and ideas while the precise plan would be hammered out later, the French source said, adding that Germany was reluctant about certain details.

"All European nations are facing budgetary problems and it isn't easy to justify, according to public opinion, that they must help Greece out," a European governmental source said.

Spain and Portugal are among the other eurozone nations with massive public deficits.

Greece has been under increasing pressure from financial markets due to the size of its deficit and debts, swollen by the global economic crisis.

Athens is trying to slash expenditure and raise revenue to narrow its 12.7 percent deficit, which is more than four times the permitted eurozone limit as a percentage of gross domestic product. Public debt is estimated at about 300 billion euros.

The Greek crisis has driven up borrowing costs for Athens, fuelling fears of a payment default and a eurozone domino effect.

The problem has also sent the euro sliding down against the dollar.

Date created : 2010-02-10


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