Markets had been spooked in recent days by renewed talk among eurozone policymakers of an imminent default by Greece.
This was prompted by the country's failure to meet the fiscal goals set out in its European Union/IMF bailout.
EU Economic Affairs Commissioner Olli Rehn told the European Parliament that a Greek default or exit from the eurozone would carry "dramatic" social, political and economic consequences for Greece, Europe and the rest of the world.
French banks downgraded
Credit rating agency Moody's has today downgraded two big French banks, Société Générale and Credit Agricole. It left a third, BNP Paribas, on negative watch, meaning it could be downgraded later.
Shares in all three banks have plummeted in recent weeks on worries about their exposure to Greek government debt and turbulence caused by the eurozone debt crisis.
Confidence in the eurozone was further dented yesterday when Italy, where politicians vote later on an austerity package, was forced to pay the highest interest rates since joining the euro in 1999 to sell five-year bonds.
Italy is a particular concern because, while Europe's bailout fund can cope with rescuing smaller, peripheral nations, it lacks the financial firepower to save the eurozone's third largest economy.
Barroso raises issue of Eurobonds
Meanwhile, the President of the European Commission has said that the Commission will soon present options on Eurobonds.
Some have seen Eurobonds - a mechanism where bonds are issued with the backing of all of the EU member states - as a solution to solving the sovereign debt crisis.
José Manuel Barroso told MEPs some of the options to be presented would require treaty changes.
In a debate on the financial crisis, he said EU members providing financial assistance must show they are determined to deliver support to countries that are delivering on their bailout programmes as agreed.
He also said national politicians needed to do much more to explain the benefits that the euro brings.
Mr Barroso told MEPs the markets believe the euro area is incapable of solving its own problems because it is too slow in taking action.
His comments gave a lift to the European markets and most were up between 0.5% and 1% this morning.
Polish Finance Minister Jacek Rostowski, whose country holds the rotating EU presidency, has said that the European Union could be destroyed by the eurozone crisis.
"Europe is in danger," Mr Rostowski told the European Parliament in Strasbourg, France.
"If the eurozone breaks up, the European Union will not be able to survive, with all the consequences that one can imagine."
Leaders to discuss Greece's debt problems
Greece's continued debt problems will be up for discussion during a conference call between the leaders of Greece, France and Germany. Greek Prime Minister George Papandreou is to discuss Greece's debt crisis with German Chancellor Angela Merkel and French President Nicolas Sarkozy today. The three leaders will discuss the ongoing uncertainty in a tele-conference call this afternoon. Despite volatile market trading yesterday and continuing fears over the possibility of default, the German Chancellor insisted Greece will stay in the euro area. However, Asian stocks and the euro fell this morning as investors remain unconvinced that eurozone leaders have a coherent plan to tackle the sovereign debt problems.
Wednesday, September 14, 2011
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