By Jan Strupczewski
BRUSSELS, May 9 (Reuters) - European Union finance ministers on Sunday promised to counter the 'wolfpack' of the financial markets and defend the euro as they held an emergency meeting on ways to keep Greece's debt crisis from spreading.
The European Commission was presenting a proposal for a stabilization mechanism intended to provide a multibillion- euro safety net for other euro zone countries with bloated public finances such as Portugal, Spain or Ireland.
Financial markets have been punishing euro zone members with high deficits or debts as well as low economic growth, threatening to plunge them into Greece's plight.
The International Monetary Fund on Sunday approved a 30 billion euro ($40 billion) rescue loan for Greece, part of a broader combined EU-IMF bailout totaling 110 billion euros ($147 billion) over three years.
To secure the funds, Greece has committed to budget austerity measures so sharp that they have already caused violent protests.
'Today's strong action by the IMF to support Greece will contribute to the broad international effort underway to help bring stability to the euro area and secure recovery in the global economy,' IMF Managing Director Dominique Strauss-Kahn said in a statement.
'WOLFPACK BEHAVIORS'
But whether the coordinated international actions would settle global markets, which have been roiled in recent days, remained to be seen. Policymakers around the globe have become worried about the knock-on effects should the crisis spread.
'We now see ... wolfpack behaviors, and if we will not stop these packs, even if it is self-inflicted weakness, they will tear the weaker countries apart,' Swedish Finance Minister Anders Borg told reporters in Brussels as he arrived for the meeting.
Britain's finance minister Alistair Darling stressed the need to stabilize markets, while ministers from France, Spain, Finland and other euro zone states vowed to defend their shared currency.
U.S. President Barack Obama and German Chancellor Angela Merkel spoke by phone about the importance of EU members acting to build confidence in markets, a White House spokesman said.
Economists estimate that if Portugal, Ireland and Spain -- three other heavily indebted euro zone countries -- eventually come to require bailouts similar to Greece's, the total cost could be some 500 billion euros.
EU sources said the European Commission would ask the bloc's finance ministers to extend an existing aid mechanism for non-euro zone countries to nations in the single-currency area.
The Commission will also ask them to raise the existing amount available under the mechanism, called the balance-of-payments facility, by 60 billion euros ($80.5 billion). The maximum available now is 50 billion euros.
The 60 billion euro top-up would be guaranteed by all 27 EU members and the loans, if paid out to an EU member, would carry conditions set by the International Monetary Fund, one EU source said.
As an additional measure for euro zone countries only, the Commission will propose a separate mechanism of intergovernmental loans, the source said.
'All in all this is good news, but it is unlikely in itself to calm markets; it's all too 'slow-burner' stuff,' said Erik Nielsen, chief European economist at Goldman Sachs. He said he expected the European Central Bank would soon need to take some type of emergency action.
EU sources said ECB governors were discussing the crisis but no details were available.
MARKET TURMOIL
The 16 nations that use the single currency have been criticized for contributing to market uncertainty by responding too slowly to the crisis in Greece.
An IMF board source told Reuters that some board members had shared those concerns and raised worries that the crisis could spread to other euro zone countries.
Fears that a euro zone debt crisis could rock banks and the global economy like the September 2008 collapse of U.S. bank Lehman Brothers swept through markets last week, pushing global stocks to around a three-month low.
Last week's euro zone summit asked for a European Stabilization mechanism. Some economists said the move was welcome news, but it would cure the symptoms, rather than the disease.
'By putting in place additional safeguards for the euro area financial system, governments finally appear to be rising to the challenge of the sovereign debt crisis,' Morgan Stanley said in a research note to clients.
'But, like the measures taken before -- for the benefit of Greece -- a stabilization fund is just buying time for distressed borrowers,' it said.
(Additional reporting by Lesley Wroughton in Washington; Writing by Charles Dick and Tim Ahmann; Editing by Eric Walsh) ($1=.7453 Euro) Keywords: EUROZONE/ (eric.walsh@thomsonreuters.com; 1-202-789-8015; Reuters Messaging: eric.walsh.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
BRUSSELS, May 9 (Reuters) - European Union finance ministers on Sunday promised to counter the 'wolfpack' of the financial markets and defend the euro as they held an emergency meeting on ways to keep Greece's debt crisis from spreading.
The European Commission was presenting a proposal for a stabilization mechanism intended to provide a multibillion- euro safety net for other euro zone countries with bloated public finances such as Portugal, Spain or Ireland.
Financial markets have been punishing euro zone members with high deficits or debts as well as low economic growth, threatening to plunge them into Greece's plight.
The International Monetary Fund on Sunday approved a 30 billion euro ($40 billion) rescue loan for Greece, part of a broader combined EU-IMF bailout totaling 110 billion euros ($147 billion) over three years.
To secure the funds, Greece has committed to budget austerity measures so sharp that they have already caused violent protests.
'Today's strong action by the IMF to support Greece will contribute to the broad international effort underway to help bring stability to the euro area and secure recovery in the global economy,' IMF Managing Director Dominique Strauss-Kahn said in a statement.
'WOLFPACK BEHAVIORS'
But whether the coordinated international actions would settle global markets, which have been roiled in recent days, remained to be seen. Policymakers around the globe have become worried about the knock-on effects should the crisis spread.
'We now see ... wolfpack behaviors, and if we will not stop these packs, even if it is self-inflicted weakness, they will tear the weaker countries apart,' Swedish Finance Minister Anders Borg told reporters in Brussels as he arrived for the meeting.
Britain's finance minister Alistair Darling stressed the need to stabilize markets, while ministers from France, Spain, Finland and other euro zone states vowed to defend their shared currency.
U.S. President Barack Obama and German Chancellor Angela Merkel spoke by phone about the importance of EU members acting to build confidence in markets, a White House spokesman said.
Economists estimate that if Portugal, Ireland and Spain -- three other heavily indebted euro zone countries -- eventually come to require bailouts similar to Greece's, the total cost could be some 500 billion euros.
EU sources said the European Commission would ask the bloc's finance ministers to extend an existing aid mechanism for non-euro zone countries to nations in the single-currency area.
The Commission will also ask them to raise the existing amount available under the mechanism, called the balance-of-payments facility, by 60 billion euros ($80.5 billion). The maximum available now is 50 billion euros.
The 60 billion euro top-up would be guaranteed by all 27 EU members and the loans, if paid out to an EU member, would carry conditions set by the International Monetary Fund, one EU source said.
As an additional measure for euro zone countries only, the Commission will propose a separate mechanism of intergovernmental loans, the source said.
'All in all this is good news, but it is unlikely in itself to calm markets; it's all too 'slow-burner' stuff,' said Erik Nielsen, chief European economist at Goldman Sachs. He said he expected the European Central Bank would soon need to take some type of emergency action.
EU sources said ECB governors were discussing the crisis but no details were available.
MARKET TURMOIL
The 16 nations that use the single currency have been criticized for contributing to market uncertainty by responding too slowly to the crisis in Greece.
An IMF board source told Reuters that some board members had shared those concerns and raised worries that the crisis could spread to other euro zone countries.
Fears that a euro zone debt crisis could rock banks and the global economy like the September 2008 collapse of U.S. bank Lehman Brothers swept through markets last week, pushing global stocks to around a three-month low.
Last week's euro zone summit asked for a European Stabilization mechanism. Some economists said the move was welcome news, but it would cure the symptoms, rather than the disease.
'By putting in place additional safeguards for the euro area financial system, governments finally appear to be rising to the challenge of the sovereign debt crisis,' Morgan Stanley said in a research note to clients.
'But, like the measures taken before -- for the benefit of Greece -- a stabilization fund is just buying time for distressed borrowers,' it said.
(Additional reporting by Lesley Wroughton in Washington; Writing by Charles Dick and Tim Ahmann; Editing by Eric Walsh) ($1=.7453 Euro) Keywords: EUROZONE/ (eric.walsh@thomsonreuters.com; 1-202-789-8015; Reuters Messaging: eric.walsh.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.