BRUSSELS (AP) — European Union finance ministers promised Sunday to set up a rescue mechanism for financially troubled governments as they struggle to contain a debt crisis and keep markets from targeting weaker eurozone members — and get it done before trading starts in a few hours.
Spanish Finance Minister Elena Salgado said the ministers are determined to safeguard the currency used by 16 of the EU’s 27 member states, which has come under increasing pressure since the financial meltdown of one of its members, Greece.
France and Germany, the two largest members of the eurozone, agree on measures to resolve the European financial crisis, according to a two-sentence statement from French President Nicolas Sarkozy’s office Sunday.
It provided no details on the deal, which will be announced later if a qualified majority of the 27 EU finance ministers sign on to the deal.
Mr. Sarkozy’s office said he had spokeen with President Obama and the two leaders agreed on “the need for a large-scale response to the current disorders that are affecting the markets.”
The EU’s slow response to the crisis and its failure to keep Greece from getting to the brink of bankruptcy triggered slides in the euro and global stocks last week. Fears intensified that the crisis would spread to other countries with shaky finances, such as Spain and Portugal.
“We are going to defend the euro,” said Ms. Salgado, who presided over an emergency meeting in Brussels. “We have to give more stability to our currency… . We will do whatever is necessary” to reach agreement.
EU sources said the measures could involve extending a 50 billion euro ($64.2 billion) financial support facility that already is available to some EU nations outside of the eurozone and bringing the ceiling up to 110 billion euros ($141.5 billion).
There is also talk about a system of loan guarantees. Some economists have urged the European Central Bank to support the bond market by buying government bonds. Bank President Jean-Claude Trichet said last week the bank did not discuss such a step at its Thursday meeting but stood ready to take unspecified additional measures if appropriate.
Ministers are pushing to have something approved by the time stock markets open Monday because vague promises have been unable to calm market turmoil over the past weeks. Asian trading opens first, followed hours later by Europe and then Wall Street.
“We need to make progress today because in the night, when the markets are opening, we cannot afford disappointments,” Swedish Finance Minister Anders Borg said.
“We now see herd behaviors in the markets that are really pack behaviors, wolf pack behaviors,” he said. If unchecked, “they will tear the weaker countries apart, so it is very important that we now make progress.”
Some eurozone nations blamed the fragile governments and a lack of European cooperation for the crisis.
“I’m against putting all the blame on speculation,” said Austrian Finance Minister Josef Proell. “Speculation is only successful against countries that have mismanaged their finances for years.”
Underscoring the urgency, the European Commission was working out the details of the deal even before the meeting started. Talks continued into Sunday evening, and a news conference scheduled for 6 p.m. (noon EDT) was postponed.
Compounding the Greek financial crisis, attention has centered on fragile finances of countries such as Spain and Portugal, which in turn could drag the whole of the eurozone further down. Fear of default led to investors demanding high interest rates that Greece could not pay, forcing it to seek a bailout. The risk is that market skepticism will make Portugal and Spain pay more and more to borrow, worsening their plight.
“We have to take decisions that will restore the stability of the euro for the eurozone, and we have to work on the mechanism which will be comprehensive and efficient to restore stability,” said Christine Lagarde, France’s minister of economic affairs, industry and employment.
Early Saturday, the eurozone leaders gave final approval for an 80 billion euro ($100 billion) rescue package of loans to Greece for the next three years to keep it from imploding.
In Washington on Sunday, the board of the International Monetary Fund approved its 30 billion euro ($40 billion) share of the bailout for Greece.
Spain 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.
Financial 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 eurozone nations.
Many economists think Greece eventually will default anyway, which could deal a sharp blow to the euro and lead to sharply higher borrowing costs for other indebted countries in Europe. Default, or market contagion to other countries, could lead to panic, intimidating consumers from spending and making banks fearful to lend money to businesses and consumers.
The crisis also has affected markets around the globe, and Mr. Obama spoke for a second time in a week with German Chancellor Angela Merkel about Europe’s economic situation.
White House spokesman Bill Burton said the two leaders discussed the importance of the EU’s taking “resolute steps” to build confidence in the markets.
German Finance Minister Wolfgang Schaeuble was unable to attend the meeting after being taken to a Brussels hospital apparently suffering from a bad reaction to a new medicine he had taken, the country’s Finance Ministry said.
Mr. Schaeuble, who has had health problems following a recent operation, was under observation at a hospital in the Belgian capital. He was replaced at the meeting by Interior Minister Thomas de Maiziere, who is an expert on financial issues.
AP business writer Emma Vandore in Brussels and Associated Press writer Elaine Ganley in Paris contributed to this report.
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