Turmoil in international markets hangs over emergency summit of European leaders
Ian Traynor, Brussels
European leaders are battling a crisis of confidence in the euro single currency tonight, desperately seeking a formula to reassure the markets as the emergency triggered by Greece's huge debt levels and Europe's response threatened to go global.
An emergency summit of the 16 leaders of the countries using the single currency was held in Brussels, with chancellor Angela Merkel of Germany and president Nicolas Sarkozy of France demanding tougher and quicker regulation of the financial markets in what looked like a doomed attempt to contain contagion from the Greek drama.
With the pace of developments outstripping the ability of political leaders to respond, what was initially called as a summit to bless a €110bn (£95bn) rescue package for Greece turned into a frantic exercise in global crisis management.
Alarm bells were ringing in major capitals across the world where leaders voiced their exasperation with European attempts to contain the fallout from Greece. In what may have been Alistair Darling's last part in trying to manage international financial turbulence, the chancellor took part in a phone conference of G-7 finance ministers discussing the implications for the international bond markets of the Greek debt debacle.
Australia's prime minister, Kevin Rudd, was scathing about the EU package for Greece over three years agreed last weekend by 15 eurozone countries and the International Monetary Fund: "Markets have judged those arrangements to be inadequate," he .
"This is a global issue," Japan's deputy finance minister, Rintaro Tamaki, told Bloomberg news agency. "All the financial markets are now in turmoil… The impact of the Greek crisis has gone beyond the euro area".
In Germany, the key European player in the crisis, parliament agreed to the highly unpopular bailout, voting for more than €22bn in emergency loans to Athens.
While pleading for the funds, Merkel has rounded furiously on the markets. After stating earlier this week that "politics have to reassert primacy over the financial markets", she said that the "speculators are our opponents" and described the banks as "perfidious".
Describing politicians as being in battle with the markets, she added: "Like all my other colleagues, I want to win this fight".
But the costs to Spain and Portugal of borrowing rose to their highest levels, a day after the euro sunk to its lowest against the dollar for more than a year.
Merkel and Sarkozy, while frequently at odds, demanded that tonight's summit consider moves to impose tougher penalties on eurozone countries breaking the fiscal rules and for greater peer review of each other's budgets. They reserved their strongest criticism for the markets and the credit rating agencies which they blamed for making a bad situation worse.
"Market reactions during the last few days have amplified the crisis and provoked very large swings in the yields of some euro area member states' sovereign bonds not aligned with the development of fundamentals," they said. "In the light of last week's events, a review should explicitly refer to the rating process for sovereign debts, to communication methods and the publication of rating changes, taking into account the possible role of credit rating agencies in amplifying the crisis and their impact on financial stability. Potential actions should include stricter standards under European law".
The Guardian
