EU leaders search for solution to Greek debt crisis, trying to calm market fears of default

EU searches for solution to Greek crisis

BRUSSELS — Germany and France dangled a limited promise of “political support” — but no financial aid — for debt-burdened Greece at an EU summit Thursday, trying to defuse market fears about the future of the euro and Europe’s economic unity.

Nervous markets worldwide are watching for concrete assurance that the 27-nation European Union can help Greece stave off a default — and keep the crisis from spreading to other vulnerable countries, threatening Europe’s hesitant economic recovery.

French President Nicolas Sarkozy and German Chancellor Angela Merkel were meeting Thursday with Greek Prime Minister George Papandreou and EU President Herman Van Rompuy before wider EU talks, delayed by two hours because of heavy snow that caused flight delays at Brussels airport.

European Central Bank President Jean-Claude Trichet met Thursday morning with the head of a eurozone finance ministers, Jean-Claude Juncker, and Spain’s prime minister Jose Luis Rodriguez Zapatero.

None has made any public statement so far and aides would not comment on those talks. The question ultimately is whether any statement at the end of the meeting will be strong enough to keep markets from selling off Greek government bonds, and, more broadly, Greek and European stocks.

French government sources said France and Germany want to offer only “political support” and will try to get the other EU leaders on board at Thursday’s meeting. A senior French official said the countries could follow up with more precise plans of real help at a later stage. The official, who spoke on condition of anonymity because of the sensitivity of the issue, did not provide specifics.

“Here’s the message: we are behind Greece,” the official said. “I think a message needs to be given to markets that we will know how to resolve the Greek question.”

A senior German official said that “no concrete aid measures are being considered for Greece or other countries” and that “there is no financing need at the moment” for Greece.

He said he expects Greece to come clean with details of spending cuts this year, going far beyond general promises to overhaul its public sector and reform pensions and health care.

The pressure is on leaders gathering in Brussels, who had hoped to talk Thursday about long-term plans for making Europe more vibrant and competitive economically but instead are deep in worry about whether to bail out Greece.

Markets see Greece at risk of defaulting on its massive borrowings because it faces several years of sluggish growth and mounting debt that current austerity plans may not be able to stem. Greece’s fiscal problems have shaken the euro — the common currency for 16 European nations — and underscored the interconnectedness of the global economy.

Greece needs to borrow €54 billion (nearly $75 billion) from bond markets this year to plug its budget gap. But officials in Germany and France — seen as drivers of any eventual aid plan for Greece because they are the biggest economies that use the euro — warn that they have not yet made any decision to put money on the table.

So far Greece has been able to borrow from markets but is facing increasing interest costs as markets price in higher risk of a possible default.

Papandreou on Wednesday promised to reduce Greece’s deficit to 8.7 percent of gross domestic product this year, from 12.7 percent last year, the highest in the EU and four times above an EU limit.

But markets doubt Greece’s credibility after it admitting falsifying statistics for years to make the deficit look smaller. They also worry that Greece can’t carry out any cuts because it risks social unrest.

Greek workers shut down schools, grounded flights and walked out of hospitals Wednesday to protest austerity measures, and a much broader strike is planned for Feb. 24.

Associated Press writer Robert Wielaard in Brussels contributed to this report.