BRUSSELS — German leader Angela Merkel was to hold talks at the European Commission Wednesday amid efforts to contain the eurozone debt crisis, as markets reacted nervously to an EU plan to help troubled banks.
The talks come after two days of negotiations between EU finance ministers ended without a breakthrough and as Athens was again denied the next eight billion euro ($10.7 billion) tranche of bailout cash it needs to avoid default.
In the Greek capital, civil servants staged another 24-hour walkout to protest.
The 24-hour walkout crippled trains and shut down schools and courthouses, while hospitals were placed on emergency staffing.
Museums and archaeological sites were also to remain closed.
Civil servants are protesting against a plan to put some 30,000 employees on labour reserve and reduced pay after they suffered sweeping wage cuts last year.
The strike is supported by the main Greek union GSEE, which has called a general strike against the measures on October 19.
A demonstration will be held in Athens later on Wednesday.
Fears that the debt crisis could trigger a new financial sector collapse have sent global markets into freefall, but comments by the European Commission that it planned a coordinated bid to recapitalise lenders lifted US shares.
The respite was shortlived, however, with Asian traders more sceptical after news that Franco-Belgian bank Dexia had been broken up and Italy's debt rating had been cut, with Tokyo and Seoul both falling.
As the two-days crisis talks wrapped up Tuesday, EU officials demanded Greece make more sacrifices and warned banks may have to shoulder more losses as part of the resolution of the debt crisis.
"I am not pretending that by the end of the day we had a solution to the eurozone crisis, much to my frustration," British Chancellor George Osborne told Sky News after returning from Tuesday's meeting in Luxembourg.
"But I think we did take some steps forward ... We need to reflect on the reality of the situation in the eurozone and account for the reality of sovereign risk, which requires more capital in some eurozone banks."
European commissioner for economic affairs Olli Rehn told the Financial Times that a unified approach to the crisis was required.
"There is an increasingly shared view that we need a concerted, coordinated approach in Europe while many of the elements are done in the member states," he told the paper.
"Capital positions of European banks must be reinforced to provide additional safety margins and thus reduce uncertainty," Rehn said.
On Tuesday, Dexia's shares plunged 37 percent before French and Belgian regulators stepped in to guarantee its depositors and creditors.
French Finance Minister Francois Baroin compared the guarantees to the 6.4-billion-euro bailout of Dexia in 2008, when it was hit by the US sub-prime loan crisis.
Ratings agency Moody's downgraded Italy's government rating from Aa2 to A2 with a negative outlook, citing risks for the financing of long-term debt and slow economic growth.
And in a separate report Moody's warned that the market pressure on European sovereign debt was not about to let up, with the prospect of weak growth in the eurozone likely to prevent governments from reducing their deficits.
"There has been a profound loss of confidence in certain European sovereign debt markets, and Moody's considers that this extremely weak market sentiment will likely persist," it said in an analysis published late Tuesday.
"It is no longer a temporary problem that might be addressed through liquidity support, and several euro-area governments are increasingly affected by the loss of confidence."
The worry over how banks would be hit grew when Luxembourg premier Jean-Claude Juncker warned them to expect greater losses on their Greek debt than the 21 percent "haircut" agreed in July.
German Finance Minister Wolfgang Schaeuble confirmed that bondholders might have to take a bigger writedown, underlining that banks would then take a bigger hit.
Many European banks -- notably French banks -- have extensive holdings of Greek sovereign debt, and are expected to need substantial capital support in the event of a default.
With Juncker warning that Athens could wait until November to collect its next rescue package handout, Greek Finance Minister Evengelos Venizelos suggested his country was being made a "scapegoat" for eurozone debt troubles.
The bad news hit stock markets and the euro Tuesday. London's FTSE-100 fell 2.58 percent; the DAX tumbled 2.98 percent and the CAC-40 shed 2.61 percent.
But the European Commission comments of a possible concerted approach to protect European banks boosted US stocks at the end of trade.
The European currency on Tuesday hit a nine month low against the dollar at $1.3146, and a 10-year low on the yen, 100.76 yen.
And in Asian trade the euro edged down and stood at $1.3315 against $1.3338 late Tuesday in New York.
Source: www.afp.com
The talks come after two days of negotiations between EU finance ministers ended without a breakthrough and as Athens was again denied the next eight billion euro ($10.7 billion) tranche of bailout cash it needs to avoid default.
In the Greek capital, civil servants staged another 24-hour walkout to protest.
The 24-hour walkout crippled trains and shut down schools and courthouses, while hospitals were placed on emergency staffing.
Museums and archaeological sites were also to remain closed.
Civil servants are protesting against a plan to put some 30,000 employees on labour reserve and reduced pay after they suffered sweeping wage cuts last year.
The strike is supported by the main Greek union GSEE, which has called a general strike against the measures on October 19.
A demonstration will be held in Athens later on Wednesday.
Fears that the debt crisis could trigger a new financial sector collapse have sent global markets into freefall, but comments by the European Commission that it planned a coordinated bid to recapitalise lenders lifted US shares.
The respite was shortlived, however, with Asian traders more sceptical after news that Franco-Belgian bank Dexia had been broken up and Italy's debt rating had been cut, with Tokyo and Seoul both falling.
As the two-days crisis talks wrapped up Tuesday, EU officials demanded Greece make more sacrifices and warned banks may have to shoulder more losses as part of the resolution of the debt crisis.
"I am not pretending that by the end of the day we had a solution to the eurozone crisis, much to my frustration," British Chancellor George Osborne told Sky News after returning from Tuesday's meeting in Luxembourg.
"But I think we did take some steps forward ... We need to reflect on the reality of the situation in the eurozone and account for the reality of sovereign risk, which requires more capital in some eurozone banks."
European commissioner for economic affairs Olli Rehn told the Financial Times that a unified approach to the crisis was required.
"There is an increasingly shared view that we need a concerted, coordinated approach in Europe while many of the elements are done in the member states," he told the paper.
"Capital positions of European banks must be reinforced to provide additional safety margins and thus reduce uncertainty," Rehn said.
On Tuesday, Dexia's shares plunged 37 percent before French and Belgian regulators stepped in to guarantee its depositors and creditors.
French Finance Minister Francois Baroin compared the guarantees to the 6.4-billion-euro bailout of Dexia in 2008, when it was hit by the US sub-prime loan crisis.
Ratings agency Moody's downgraded Italy's government rating from Aa2 to A2 with a negative outlook, citing risks for the financing of long-term debt and slow economic growth.
And in a separate report Moody's warned that the market pressure on European sovereign debt was not about to let up, with the prospect of weak growth in the eurozone likely to prevent governments from reducing their deficits.
"There has been a profound loss of confidence in certain European sovereign debt markets, and Moody's considers that this extremely weak market sentiment will likely persist," it said in an analysis published late Tuesday.
"It is no longer a temporary problem that might be addressed through liquidity support, and several euro-area governments are increasingly affected by the loss of confidence."
The worry over how banks would be hit grew when Luxembourg premier Jean-Claude Juncker warned them to expect greater losses on their Greek debt than the 21 percent "haircut" agreed in July.
German Finance Minister Wolfgang Schaeuble confirmed that bondholders might have to take a bigger writedown, underlining that banks would then take a bigger hit.
Many European banks -- notably French banks -- have extensive holdings of Greek sovereign debt, and are expected to need substantial capital support in the event of a default.
With Juncker warning that Athens could wait until November to collect its next rescue package handout, Greek Finance Minister Evengelos Venizelos suggested his country was being made a "scapegoat" for eurozone debt troubles.
The bad news hit stock markets and the euro Tuesday. London's FTSE-100 fell 2.58 percent; the DAX tumbled 2.98 percent and the CAC-40 shed 2.61 percent.
But the European Commission comments of a possible concerted approach to protect European banks boosted US stocks at the end of trade.
The European currency on Tuesday hit a nine month low against the dollar at $1.3146, and a 10-year low on the yen, 100.76 yen.
And in Asian trade the euro edged down and stood at $1.3315 against $1.3338 late Tuesday in New York.
Source: www.afp.com
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