Greece urges strong euro decision

The Greek Prime Minister, George Papandreou, has said that Europe now needed to take strong decisions to calm financial markets.

Eurozone leaders will meet in Brussels later to try to find a way out of the debt crisis that has dogged the region for more than a year.

They will discuss a new permanent, extended replacement for the 440bn- euros (£379m; $614bn) bail-out fund.

A pact aiming for common economic policies, will also be debated.

However, the likelihood of any firm decisions being made has diminished due to the need to first talk about the Libyan situation, the BBC’s Europe business correspondent Nigel Cassidy says.

The markets most keenly want to see signs of progress on making the eurozone’s 440bn euros temporary support facility, the European Financial Stability Facility (EFSF), permanent.

The new European Stability Mechanism (ESM) – which is designed to replace the EFSF – will have double the current effective lending capacity.

Weakening

However, a firm decision on the creation of a new permanent bail-out fund is likely to be put back to a broader meeting at the end of this month involving all European Union leaders.

Mr Papandreou said his country – the first to need bailing out by its eurozone partners and others – had done all it could, and now needed collective action.

“On the financial eurozone crisis, we are on top of our programme, we have taken the pain to make our economy viable, but now we need European decisions – strong European decisions – to calm the market.”

Greece and the Republic of Ireland are also expected to press for easier repayment terms.

The eurogroup chairman, Jean-Claude Juncker, said on Friday he had no reason to doubt the solvency of Greece after its bail-out by the European Union and International Monetary Fund (IMF).

Common rules

Meanwhile, Spain, one of the countries the markets fear may next need a bail-out, this week had its credit rating downgraded – a sign that its ability to pay back its debts is weakening.

Other moves to safeguard the euro include a new pact on sensitive economic policies, including proposals for lower labour taxes, a common corporate tax base and indexing retirement age to life expectancy.

A draft communique on this has been prepared.

Countries including Germany regard differences in taxation and spending between eurozone members as key factors in creating the debt crisis.

Higher-spending and lower-taxation countries such as Greece, the Republic of Ireland, Spain and Portugal have had to pay more to borrow money than more prudent countries.