The leaders of the Euro currency states have agreed to support Greece in its debt crisis. They promised coordinated action if needed to safeguard stability in the euro area as a whole. At a summit in Brussels, they made this conditional on Athens taking ambitious measures to rein in its titanic deficit.
After talks among officials and Prime Minister George Papandreou, the EU Council president said the Greek government had not requested any
Chancellor Angela Merkel of key player Germany said: “We’ve made a very political statement. The European Union supports Greece. But at the same time, and this in my view is essential, Greece must fulfill its budgetary commitments, and I believe that would be an extremely important signal.”
Athens has pledged to cut its 12.7% budget deficit by 4 percent this year.
The Eurogroup finance ministers will meet on Monday for further work on the support policy. Analyst Daniel Gros remarks on the caution involved: “Implicitly, the EU wants to say: Look, we bailed out Greece, it means they we will also bail out Portugal, Spain and other countries, if there were a need for it. We very much hope there will ne no need. And the question is: Will financial markets test that statement or not?”
If left unchecked, it’s feared the Greek problem might create a vortex for other high-debt, rising deficit euro-zone countries (total 16), such as Spain or Italy. Athens needs to borrow 53 billion euros this year to finance its budget and refinance its debts.