Stocks rally on Greek support
Updated: 2011-09-16 08:02
France, Germany committed to keeping Greece in eurozone
LONDON - European shares rose on Thursday after German and French leaders said they were determined to keep Greece in the eurozone.
The pan-European FTSEurofirst 300 index of top shares was up 0.8 percent at 920.50 points after gaining 1.4 percent in the previous session on hopes of a plan for a common euro bond that would help ease the regions debt crisis.
France and Germany said on Wednesday that they were convinced that debt-ridden Greece's future lay in the eurozone, as Athens vowed to stick to the harsh austerity measures needed for an EU bailout.
"It is a strong statement that France and Germany has made of trying to keep Greece in the euro zone," said Andrea Williams, who manages $2.1 billion in assets for Royal London Asset Management. "It looks like they are buying time to put instruments in place to help absorb any losses. But Greece is not out of the woods yet, they still must implement the reforms and there is a risk the country could default," Williams said.
The backing from two of Europe's major economies came after a conference call with Greek Prime Minister George Papandreou, against the backdrop of mounting international pressure on the EU to get its house in order.
Rising expectations of a Greek default or even an inglorious exit from the eurozone continued to shake the markets. The fear is that Athens will be unable to apply an EU-IMF recovery plan.
But French President Nicolas Sarkozy and German Chancellor Angela Merkel "are convinced that the future of Greece is in the euro zone", the French president's office said in a statement after the three-way talks.
"The Greek prime minister confirmed his absolute determination to put in place all the necessary measures to carry out all of the commitments made."
Athens has been warned that failure to overhaul its economy could cost vital funds out of the 110-billion-euro ($150-billion) EU-IMF bailout that rescued it from bankruptcy in 2010.
International auditors are set to return to Greece. If they decide not to unlock the next 8-billion-euro ($11 billion) tranche in rescue loans, Athens would run out of cash next month.
A new 159-billion-euro ($219 billion) lifeline also hangs in the balance, with some euro zone members increasingly frustrated at Athens' delay in enacting agreed reforms.
There is uncertainty too as to whether enough banks will express interest in an initiative to ease Greece's huge debt burden by agreeing to exchange maturing bonds with longer-term obligations.
Talks on Friday in Poland between EU and eurozone finance ministers and central bankers could prove decisive in breaking the deadlock in Europe over a demand by Finland for Greek collateral.
United States Treasury Secretary Timothy Geithner, who will attend the talks in Poland this weekend, said on Wednesday European states "now recognize they are going to have to do more to resolve the crisis".
Emerging countries rushing valiantly to the rescue of a Europe drowning in debt and keeping global growth from hitting the rocks.
Brazil has announced that the BRICS group of countries of which it forms part with Russia, India, China and South Africa, will meet in Washington next Thursday to discuss how to help the EU in its latest debt crisis. And China has said it stands ready to boost European investments.
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