EU Leaders Urge Greece to Stick to Bailout Plan

Posted November 3rd, 2011 at 7:05 pm (UTC-5)
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ReutersUS 3 – 11/3/2011 6:31:00 PM – BC-BIZREP-NOV03-VARIOUS-

European leaders say they are ready to continue supporting debt-ridden Greece if Athens remains committed to the agreed upon bailout package.

European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy urged Greece in a joint statement Thursday to continue with the implementation of the austerity measures, which are a condition for Greece to remain in the eurozone and receive more aid.

The financial market turmoil caused by Greece's indecision over the bailout deal has dominated the first day of the G20 summit in France. Barroso and Rompuy also called for ambitious action to spur economic growth and reduce growing unemployment worldwide.

U.S. President Barack Obama said resolving the European financial crisis was the most important task of the summit.

Earlier Thursday, EU leaders welcomed Greek Prime Minister George Papandreou's decision to scrap a referendum on the bailout package for Greece. He announced the vote as the domestic opposition called for his resignation. Mr. Papandreou faces a vote of confidence in parliament Friday.

German Chancellor Angela Merkel and French President Nicolas Sarkozy made it clear to the Greek leader that they would not allow Greece's internal political squabbling to jeopardize the stability of the 17-member eurozone.

Meanwhile, the European Central Bank unexpectedly cut its key interest rate Thursday by a quarter percentage point to 1.25 percent.

The bank's new president, Mario Draghi, said the rate cut was necessary because there are stronger downside risks for Europe's economy in the coming months, and because financial markets are in turmoil over the continuing debt crisis in Greece and other European Union countries.

The confrontation between the leaders of Europe's key economies and debt-ridden Greece raised for the first time the possibility of a state being ejected from the 12-year-old eurozone, even leaving the European Union itself.

European Commission President Jose Manuel Barroso Thursday called for national unity in Greece and warned that if it backs out of the agreement, it will have no money to pay for schools, hospitals and for the basic functioning of the state.

Mr. Papandreou reversed his decision on the referendum after the Greek opposition said it would back the bailout plan in parliament. But he rejected calls for his resignation and said it would be “catastrophic” to call early elections at this time.

The international bailout plan for Greece includes a 50-percent debt write-off, but it also imposes tough austerity measures on the indebted country.

Greece is in desperate need of the next $11-billion disbursement of its bailout fund.