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Obama calls for urgent debt deal Obama calls for urgent debt deal
(about 2 hours later)
   
US President Barack Obama has warned there is still work to be done on how the eurozone can end a financial crisis that threatens to engulf the world.US President Barack Obama has warned there is still work to be done on how the eurozone can end a financial crisis that threatens to engulf the world.
Speaking on Thursday ahead of the opening of the G20 summit in France, he said that the most important topic on the agenda was Europe's problems.Speaking on Thursday ahead of the opening of the G20 summit in France, he said that the most important topic on the agenda was Europe's problems.
Eurozone leaders wanted to present the G20 with a clear action plan, but Greece has thrown this into disarray.Eurozone leaders wanted to present the G20 with a clear action plan, but Greece has thrown this into disarray.
Athens is in political chaos over whether to hold a bailout referendum. Amid political chaos in Athens a mooted bailout referendum may now be scrapped.
Prime Minister George Papandreou's surprise decision to hold a national vote on Greece's latest bailout package sparked further uncertainty about whether Europe can resolve its crisis. Prime Minister George Papandreou's surprise decision to hold a national vote on Greece's latest bailout package sparked further uncertainty about whether Europe could resolve its crisis.
However, he told parliament on Thursday that if the conservative opposition party voted to pass the bailout package, then the referendum would not be needed. However, he told parliament on Thursday that if the conservative opposition party voted to pass the bailout package, the referendum would not be needed.
Meanwhile, the crisis continues to threaten Italy, whose prime minister, Silvio Berlusconi, has been called upon by some of his own MPs to quit. Meanwhile, the crisis continues to threaten Italy, whose Prime Minister, Silvio Berlusconi, has been called upon by some of his own MPs to quit.
Chinese reticence
Leaders are in Cannes at the G20 meeting of the world's biggest economies to discuss global growth and stability.Leaders are in Cannes at the G20 meeting of the world's biggest economies to discuss global growth and stability.
Mr Obama said: "The most important task over the next two days is to resolve the financial crisis in Europe.Mr Obama said: "The most important task over the next two days is to resolve the financial crisis in Europe.
"Here at the G20, we need to flesh out how the plan will be fully and decisively implemented.""Here at the G20, we need to flesh out how the plan will be fully and decisively implemented."
Other countries joined the chorus, with a South African government spokesman telling the eurozone to "get its act together".
A key part of the rescue package to be presented to the G20 was a plan to encourage wealthy emerging economies to contribute to expanding the European Financial Stability Fund (EFSF).A key part of the rescue package to be presented to the G20 was a plan to encourage wealthy emerging economies to contribute to expanding the European Financial Stability Fund (EFSF).
However, China made clear on Thursday that it would not commit to the EFSF until there was more clarity on the situation in Greece.However, China made clear on Thursday that it would not commit to the EFSF until there was more clarity on the situation in Greece.
"Beijing wants to be certain that the mechanisms work," Li Daokui of the Chinese central bank's monetary policy committee, told France's Le Figaro newspaper.
"Beijing wants to be certain that the mechanisms work," Li Daokui of the Chinese central bank's monetary policy committee told France's Le Figaro newspaper.
Agreement was however reached among G20 leaders to increase the resources of the International Monetary Fund (IMF).
The IMF has played a key role in the eurozone crisis, providing additional money to Greece, Portugal and the Irish Republic alongside the bailout loans from other eurozone and EU governments.
French President Nicolas Sarkozy also said that countries running large trade surpluses - which include China and Japan - were willing to do more to help boost global growth.
'Historic conquest''Historic conquest'
Eurozone governments struck a deal with Greece last week for a debt write-down and to bolster Europe's bailout fund and support the banking sector.Eurozone governments struck a deal with Greece last week for a debt write-down and to bolster Europe's bailout fund and support the banking sector.
But it is feared that the package has begun to unravel.But it is feared that the package has begun to unravel.
Greece's decision to hold a referendum on the deal caused political upheaval in Athens and stunned the financial markets.Greece's decision to hold a referendum on the deal caused political upheaval in Athens and stunned the financial markets.
Many Greeks are angry at the spending cuts and tax rises being demanded by other European governments and the International Monetary Fund as a condition of the bailout, and may be inclined to vote no.
Mr Papandreou and other eurozone leaders have tied the vote to whether Greece remains part of the euro bloc.Mr Papandreou and other eurozone leaders have tied the vote to whether Greece remains part of the euro bloc.
But finance chief Evangelos Venizelos led the revolt against the referendum, saying the vote must not be about Greece's future in the eurozone. On Thursday, German Chancellor Angela Merkel said that the stability of the eurozone was more important than Greece's continued membership of it.
Mr Venizelos issued a statement in the early hours of Thursday after attending crisis talks with German Chancellor Angela Merkel and French President Nicolas Sarkozy. But Greek finance chief Evangelos Venizelos led the revolt against the referendum, saying the vote must not be about Greece's future in the eurozone.
"Greece's position within the euro area is a historic conquest of the country that cannot be put in doubt. This achievement by the Greek people cannot depend on a referendum," he said. Eurozone leaders made clear that the next 8bn-euro tranche of bailout money would not be released to Greece until after any referendum has been held.
Mr Venizelos also said that the next 8bn euros (£7bn) of European Union bailout aid should be released immediately. On Thursday, Mr Venizelos said the government still had enough cash to get by without the bailout loan until 15 December.
Mrs Merkel and Mr Sarkozy had made clear that Athens would not receive its next tranche of emergency aid until the referendum had passed. Stability sought
A referendum was likely to be held on 4 December, although there is now uncertainty about whether it will go ahead.
Rising fears about Greece led to further steep falls at the start of trading on European stock markets on Thursday.
However, hopes that the Greek referendum would be abandoned had helped the markets to recover by midday trading.
Markets were given a further lift when the European Central Bank decided to cut eurozone interest rates to 1.25% from 1.3%.
The main indexes in Paris and Frankfurt were up more than 3% on the day, while London's FTSE 100 was 1.5% higher.
Stability sought
But there was continuing unease on the bond markets, with Italy and Spain forced to pay higher interest rates in order to borrow billions of euros.But there was continuing unease on the bond markets, with Italy and Spain forced to pay higher interest rates in order to borrow billions of euros.
Many economists fear that if Greece exits the euro, it could lead to financial contagion, as investors and ordinary bank depositors in other eurozone countries may fear that their own government will follow suit.Many economists fear that if Greece exits the euro, it could lead to financial contagion, as investors and ordinary bank depositors in other eurozone countries may fear that their own government will follow suit.
"Portugal and Ireland may follow Greece and you could also see a rise in the cost of borrowing for economies such as Italy," said Mr Hanna."Portugal and Ireland may follow Greece and you could also see a rise in the cost of borrowing for economies such as Italy," said Mr Hanna.
Mr Hanna explained that if Greece opted out of the eurozone, it would have to introduce its own currency which might depreciate hugely against the euro.Mr Hanna explained that if Greece opted out of the eurozone, it would have to introduce its own currency which might depreciate hugely against the euro.
Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms:
AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is miniscule. Glossary in full		 Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms:
AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is miniscule. Glossary in full
Any such move, he warned, would see the value of euro debt increase and may result in the bankruptcy of firms exposed to it.Any such move, he warned, would see the value of euro debt increase and may result in the bankruptcy of firms exposed to it.
The biggest fears surround Italy, whose economy and debts dwarf those of Greece.The biggest fears surround Italy, whose economy and debts dwarf those of Greece.
The country is finding it increasingly difficult to borrow money in the international financial markets.The country is finding it increasingly difficult to borrow money in the international financial markets.
Italy's one-year cost of borrowing has risen to 5.1%, its highest since joining the euro, and far above the mere 0.3% interest rate that Germany must pay.Italy's one-year cost of borrowing has risen to 5.1%, its highest since joining the euro, and far above the mere 0.3% interest rate that Germany must pay.
The country's cost of borrowing has continued to rise despite interventions by the European central bank to buy up Italian debts.The country's cost of borrowing has continued to rise despite interventions by the European central bank to buy up Italian debts.
Just like Athens, Rome is under pressure from European counterparts to implement further economic reforms and austerity.Just like Athens, Rome is under pressure from European counterparts to implement further economic reforms and austerity.
But also as in Greece, this is undermining the political cohesion of the government.But also as in Greece, this is undermining the political cohesion of the government.
Six Italian government MPs wrote an open letter on Thursday calling on Mr Berlusconi to make way for a transitional government.Six Italian government MPs wrote an open letter on Thursday calling on Mr Berlusconi to make way for a transitional government.
The Italian cabinet agreed a limited package of budget reforms at an emergency meeting on Wednesday evening.The Italian cabinet agreed a limited package of budget reforms at an emergency meeting on Wednesday evening.
But they failed to agree to issue a decree implementing the changes, meaning that they must now go to a confidence vote in parliament - one that Mr Berlusconi may be at risk of losing.But they failed to agree to issue a decree implementing the changes, meaning that they must now go to a confidence vote in parliament - one that Mr Berlusconi may be at risk of losing.