Euro News

EU backs Greece while steeling for 'Grexit'

European Union leaders have reiterated their support for Greece remaining in the eurozone as officials prepared behind the scenes for a possible exit and France's new president stepped up his push for eurobonds.

ABC ,

25 May, 2012

After talks in Brussels that went into the early hours of the morning and were dominated by fears of a "Grexit" of the eurozone, EU president Herman Van Rompuy said: "We want Greece to remain in the euro area while respecting its commitments."

Mr Van Rompuy said all leaders were "fully aware of the significant efforts already made by the Greek citizens".

But he stressed that Greece must keep its reform promises.

The leaders vowed to ensure that EU grants and other means of providing aid would be mobilised.

Nevertheless, diplomats said on the sidelines of the summit that officials had been asked to make contingency plans in the case of an exit, sending European stocks and the euro sharply lower.

"Continuing the vital reforms to restore debt sustainability, foster private investment and reinforce its institutions is the best guarantee for a more prosperous future in the euro area," Mr Van Rompuy said.

"We expect that after the elections, the new Greek government will make that choice."

European Commission head Jose Manuel Barroso added: "Let's wait for the people of Greece to have their say".

Greece's election on June 17 is shaping up as a referendum on whether the country stays in the euro, as parties opposed to austerity measures needed for future bailouts gain significantly in the polls.

The radical leftist Syriza party, which wants to tear up Greece's unpopular bailout from the EU and the IMF, came second on May 6 and is expected to emerge in a strong position in the next ballot.

European leaders have warned that if the next government reneges on promised reforms Greece cannot continue drawing international loans, which would likely lead an exit of the eurozone.

Eurobonds debate 'balanced'

Speaking after attending his first EU summit, Mr Hollande said he wanted to see eurobonds "written into the agenda" of the EU, saying jointly pooled eurozone debt was a fundamental means of bolstering the debt-stricken single currency.

German chancellor Angela Merkel has repeatedly come out against eurobonds, and Mr Hollande said after the talks that he had a "different conception" of what eurobonds could offer Europe.

He said: "There is perhaps a means by which to mutualise... future debt to enable countries... to access financing more easily on (money) markets."

Suggesting this would allow governments to "finance investments", the new Socialist president said that pooling liabilities for past debts was "unacceptable" but that eurobonds could help countries paying high borrowing costs, such as Spain and Italy.

Mrs Merkel said there had been a "balanced" discussion on eurobonds.

"There was a debate on the subject of eurobonds, but very balanced and with different points of view," she said after the summit.

Several participants expressed doubts about the benefits of interest rates being unified across the eurozone, Mrs Merkel added.

Mr Hollande said he was not alone at the EU table in favouring the introduction of the bonds.

Mr Van Rompuy said the subject was "briefly touched upon" by several leaders but stressed that: "There was nobody asking for the immediate introduction of this".

EU leaders are preparing ideas for a growth pact before a formal EU summit from June 28 to 29.

student protests have only grown since the provincial government last week passed emergency legislation in an attempt to end Canada's most sustained student demonstrations ever.

Protesters yesterday threw objects at police in Montreal as what started as a peaceful march fell apart. Police encircled the thousands of protesters and squeezed them into a tighter space.

Arrests were made in Montreal and Quebec City.

Yesterday's protest was declared illegal by police the minute it was scheduled to start as demonstrators didn't provide an itinerary, disobeying the new law.

Quebec Premier Jean Charest has refused to roll back the tuition hikes of C$254 (US$249) per year over seven years. Quebec has the lowest tuition rates in Canada, and they would remain among the country's lowest.

Other headlines -

Doubts over Greece weigh on euro

European single currency hits near two-year lows as EU summit fails to allay investor fears over Greek economy

Germany threatens to cut aid to Athens

Pressure on Greece has increased dramatically after Germany's central bank called for a suspension of financial support to Athens, and eurozone finance ministries agreed to draft contingency plans for a Greek exit from the euro.

Bank Of Russia Says Greece Has A Plan For Parallel Currency

Italy’s new off balance sheet wheeze 

Rome is in a bind. Arrears to local companies are choking the economy, but funding them upfront could push up the country’s debt and spook markets. So Italy is using banks to front some of the money in a way that avoids pushing up its debt at least for the time being.

Spain plans $11bn rescue of troubled bank

Minister announces full nationalisation of Bankia, country's fourth-largest lender, amid rising loan-default rates.