Arab Today, arab today merkel imf in brussels for eurozone crisis talks
Last Updated : GMT 15:01:09
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Merkel, IMF in Brussels for eurozone crisis talks

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Arab Today, arab today Merkel, IMF in Brussels for eurozone crisis talks

Brussels - AFP

German leader Angela Merkel flies in for talks at the European Commission Wednesday as efforts mount to contain the eurozone debt crisis and markets welcomed possible EU action to help troubled banks. The talks come after two days of negotiations between EU finance ministers in Luxembourg ended without a breakthrough and Athens was again denied the next eight-billion-euro ($10.7 billion) bailout cash it needs to avoid a default within weeks. In the Greek capital, civil servants staged another 24-hour walkout in protest at a government plan to sideline 30,000 staffers to reduce a bloated public deficit in return for a bankruptcy-saving EU-IMF loan. IMF Europe director Antonio Borges was also in Brussels on Wednesday to release its economic outlook for the eurozone. Fears the debt crisis could trigger a second financial sector collapse in three years have sent global markets into freefall, but comments by the European Commission late on Tuesday that it planned a coordinated bid to recapitalise lenders lifted US shares. But Asian traders showed some scepticism after news that Franco-Belgian bank Dexia had been broken up and Italy\'s debt rating cut, with Tokyo and Seoul both sliding. European shares however opened up. In initial trade, London\'s FTSE-100 index of leading shares won 2.30 percent to 5,058.09 points. In Frankfurt, the DAX gained 2.39 percent to 5,341.43 points and in Paris the CAC-40 added 2.13 percent to 2,911.16 points. As the Luxembourg crisis talks wrapped up Tuesday, EU officials demanded Greece make more sacrifices and warned banks may have to shoulder more losses as part of the resolution of the debt crisis. \"I am not pretending that by the end of the day we had a solution to the eurozone crisis, much to my frustration,\" British Chancellor George Osborne said after returning to London. \"But I think we did take some steps forward... We need to reflect on the reality of the situation in the eurozone and account for the reality of sovereign risk, which requires more capital in some eurozone banks.\" European commissioner for economic affairs Olli Rehn indicated EU-wide moves on bank recapitalisation were afoot. \"There is an increasingly shared view that we need a concerted, co-ordinated approach in Europe while many of the elements are done in the member states,\" he told the Financial Times. There is a now \"sense of urgency\" among European ministers for action, he added. On Tuesday, Dexia\'s shares plunged 37 percent before French and Belgian regulators stepped in to guarantee its depositors and creditors. Dexia, which holds billions of euros of Greek and Italian debt, was one of the first banks to be bailed out during the 2008 crisis. Account-holders withdrew 300 million euros on Tuesday, a Belgian press report said, while French officials scrambled Wednesday to defend their plan to save the bank.  Amid warnings from opposition Socialists that France\'s prized AAA credit rating could be endangered by the bailout, central bank governor Christian Noyer hit out at suggestions he said were \"very excessive and, to tell the truth, pretty inaccurate.\" He added: \"The Belgian and French states will put much less money into this operation than the British put into the Royal Bank of Scotland or Barclays.\" French Finance Minister Francois Baroin compared the guarantees to the 6.4-billion-euro bailout of Dexia in 2008, when it was hit by the US sub-prime loan crisis. Ratings agency Moody\'s downgraded Italy\'s government rating from Aa2 to A2 with a negative outlook, citing risks for the financing of long-term debt and slow economic growth. In a separate report Moody\'s warned of \"severe and potentially abrupt\" changes in the status of European sovereign debts, with the prospect of weak growth in the eurozone likely to prevent governments from reducing their deficits. \"There has been a profound loss of confidence in certain European sovereign debt markets. \"All but the strongest euro-area sovereigns are likely to face sustained negative pressure on their ratings,\" it underlined in an overnight analysis. The worry over how banks would be hit grew when Luxembourg premier Jean-Claude Juncker warned them to expect greater losses on their Greek debt than the 21 percent \"haircut\" agreed in July. German Finance Minister Wolfgang Schaeuble confirmed that bondholders might have to take a bigger writedown, underlining that banks would then take a bigger hit.  Merkel was to hold a press conference some time after 1300 GMT. Many European banks - notably French banks - have extensive holdings of Greek sovereign debt, and are expected to need substantial capital support in the event of a default.

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