(photo credit: ASSOCIATED PRESS)
BRUSSELS — French President Nicolas Sarkozy and German Chancellor Angela
Merkel announced early Saturday that the 16 eurozone nations will set
up a financial defense plan by the time markets open next week to shield
their shared currency against further attack.
With Spain and
Portugal's fragile financial systems already pounded by markets in the
wake of the Greek debt crisis, Sarkozy and Merkel laid out a plan to
defend all euro nations against aggressive market movement.
euro is an essential element of Europe. We cannot leave it to
speculators," Sarkozy said following nine hours of emergency talks by
leaders from eurozone nations.
"We will not let others undo what
generations have created," said Sarkozy.
Sarkozy added that
European finance ministers will hold another emergency meeting Sunday to
work out specifics of the anti-speculation plan.Fears of crisis spread materializing
urgency of Sunday's hastily arranged Ecofin meeting is the first clear
indication that fears of contagion are coming true, with the crisis that
emerged from Greece starting to affect other eurozone countries.
and Portugal are beginning to show the same signs of trouble that
Greece was three months ago, with borrowing costs increasing, talk of
speculative attacks and increasing concern among European partners that
some form of help could be required.
The summit, originally
called to sign off on a bailout plan for Greece and draw lessons for the
future, turned into one of crisis management amid market turmoil.
markets have continued to sell off the euro and Greek bonds even as EU
leaders have insisted for days that the Greek financial implosion is a
unique combination of bad management, free spending and statistical
cheating that doesn't apply to other euro-zone nations.
leaders, including Sarkozy and Merkel, insisted the near-collapse of
Greece and subsequent market moves against other eurozone nations
underscored that the framework of rules for managing the euro needed
revamping, according to officials close to the talks.
with the crisis, some also wanted a deeper involvement of the European
Opening the evening summit among visibly tense
dinner partners, Sarkozy and European Commission President Jose Manuel
Barroso insisted the crisis now had gone beyond Greece itself and
affected the very roots of the currency.
The euro has rules to
stop governments from undermining it with reckless spending, limiting
deficits to 3 percent of gross domestic product. Those rules were shown
to lack teeth when even big countries such as Germany and France broke
them for years without serious consequences.
throughout the world"
Merkel, whose country holds the key
to any solution, spoke Friday with President Barack Obama, who said he
supported the effort to deal with the financial crisis in Europe.
They said the bailout should keep the problem from spreading to other
countries by giving Greece three years of support and preventing a
default when it has to pay €8.5 billion in bonds coming due May 19. All
leaders confirmed the support for Greece, and Sarkozy said the money
would arrive on time.
"We are determined to move forward. But there is unprecedented
volatility throughout the world, in the world economy," said Greek Prime
Minister George Papandreou.
So far, the markets have taken little heed of leader's reassurances.
Stocks, Greek bonds and the euro plunged even after the head of the
European Central Bank, Jean-Claude Trichet, tersely underlined that
"Portugal is not Greece. Spain is not Greece" on Thursday. The euro fell
to $1.2520, its lowest in 14 months, but recovered to $1.2721 later.