Top EU official urges eurozone action at summit

July 20, 2011 - 7:00 AM
France Financial Crisis

French Finance Minister Francois Baroin leaves the Elysee Palace after the weekly cabinet meeting in Paris, Wednesday, July 20, 2011. says an emergency European summit this week should produce a

BRUSSELS (AP) — The president of the European Commission is urging eurozone leaders to come up with a convincing plan to fight the region's crippling debt crisis at their summit Thursday.

Jose Manuel Barroso warned Wednesday that "nobody should be under any illusion, the situation is very serious."

Barroso said that at the very least, leaders need to present how they will make Greece's debt sustainable, under what terms private creditors will have to contribute to a new bailout for the country, and what new powers to give to their bailout fund.

He also appealed to the European Central Bank to act responsibly, in a comment that appeared to refer to the bank's threat to freeze out Greek banks in case the country's bonds are rated at default.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

PARIS (AP) — France wants an emergency European summit this week to produce a "strong message" of support for Greece, after a sharp warning from the International Monetary Fund that leaders must do more to keep debt troubles from poisoning the entire continent's economy.

French President Nicolas Sarkozy is flying to Berlin on Wednesday afternoon in an apparent last-minute bid to agree with Chancellor Angela Merkel on some kind of new aid to Greece.

Their meeting comes ahead of an European Union summit Thursday that Merkel has said won't produce anything "spectacular."

French Finance Minister Francois Baroin set a more urgent tone Wednesday morning. "There should be a strong message tomorrow, from the highest level," he said on France-Info radio.

"Whatever happens, it's to guarantee the stability of the eurozone," he said. He urged greater interest rate flexibility for Greece "to manage the tensions over sovereign debt over the long term."

European leaders have come under criticism for slow, piecemeal efforts to stem debt crises in several countries that use the euro.

The IMF released a report Wednesday urging European leaders to act more boldly to keep debt troubles from hurting the strongest members of the eurozone and stifling growth across the continent.

There is "no consistent roadmap ahead," it warned, saying that could produce "possible significant regional and global spillovers."

It accused governments of "retrenchment, threatening to turn back the clock on economic and financial integration. ...These developments could easily jeopardize the recovery and cloud the medium-term growth outlook."

"Market participants remain unconvinced that a sustainable solution is at hand," the report said. "Limiting any further damage is now crucial."

Merkel said Tuesday that there would be no restructuring of Greece's debt or an agreement on eurobonds at Thursday's summit in Brussels. Instead, she said the summit must yield an agreement on a "controlled process of successive steps ... aiming at finally getting to the cause of the problem: The issue of reducing Greece's debt and the issue of raising its competitiveness."