Greece

German Chancellor Angela Merkel welcomed a proposal to set up a European lender of last resort, saying that the European Union’s ability to act as a bloc is on the line over the Greek financial crisis, Bloomberg reported. “Our instruments are not sufficient,” Merkel told members of the foreign press association in Berlin today. “The European Union must be able to respond to the challenges of the moment.” Merkel was speaking after officials in Berlin and Brussels said European leaders are in talks to establish what may become the European Monetary Fund and limits on credit-default swaps.

French President Nicolas Sarkozy said the euro region is ready to rescue Greece should the government struggle to fund its budget deficit, arguing that the country is “under attack” from so-called speculators, Bloomberg reported. “I want to be very clear: if it were necessary, the states of the euro zone would fulfill their commitments,” he said in Paris yesterday after a meeting with Greek Prime Minister George Papandreou. “There can be no doubt in this regard.” While Greece doesn’t need assistance right now, “we have measures, we are ready, we are determined,” he said.

France has proven surprisingly stable in the European economic storm. As Greece struggles to avoid default or bailout, Spain and Portugal watch anxiously, Sweden falls back into recession, Germany argues about historically high budget deficits and Britain grapples with deficits and debt of Hellenic proportions, France looks solid and even wise to many, The New York Times reported.

Greece survived a key test by raising €5 billion ($6.85 billion) in a bond sale, but investors warned that a looming wave of debt auctions by other European countries could make it difficult for Athens to raise the rest of the money it needs, The Wall Street Journal reported. The offer by Greece to pay 6.3% on its 10-year notes drew investors, filling order books by late morning Thursday. By lunchtime in London,the offering had €14.5 billion in bids, a sign Greece could have sold nearly three times what it advertised.

European Central Bank President Jean-Claude Trichet pressed Greece to halt its flirtation with International Monetary Fund aid and work with European allies to tame its record budget deficit, Bloomberg reported. As protesters besieged the Greek Finance Ministry to denounce €4.8 billion ($6.5 billion) of tax increases and spending cuts, the Athens government said the absence of European support might force it into the hands of the IMF.

The Greek government's new austerity measures drew a positive response from European credit and currency markets, further allaying fears that Greece might default on its debt obligations, The Wall Street Journal reported. The measures, which will save the Greek state €4.8 billion ($6.5 billion) a year, include steep cuts in civil-service salaries and entitlements, as well as a rise in Greece's sales tax by two percentage points.

The Greek government on Wednesday approved additional tax increases and a 30 percent cut in holiday bonuses for public employees as part of a new raft of austerity measures aimed at narrowing its gaping budget deficit, a government official said, The New York Times reported. The measures aim to generate at least €4 billion, or $5.5 billion, in revenue and savings this year, according to the official, who was briefed on the Cabinet discussions but not authorized to speak publicly ahead of an official announcement.

Fears of a Greek debt default are subsiding -– at least for now -– as the crisis-racked nation prepares to outline hefty new austerity measures aimed at closing its yawning fiscal deficit. But such plans may not be enough to turn around the struggling euro’s fortunes, The Wall Street Journal Market Beat blog reported.

The commissioner for monetary affairs at the European Union, Olli Rehn, said on Monday that austerity measures announced by the Greek government to stave off a mounting fiscal crisis were “in the right direction” but not adequate to reduce a bloated budget deficit by 4 percent this year and tackle a debt crisis threatening the euro zone, The New York Times reported. After talks with government and central bank officials in Athens, Mr.

A plan led by Germany and France to bail out Greece with as much as €30 billion ($41 billion) in aid began to take shape amid intense and risky jockeying between Athens and Berlin over timing and terms, The Wall Street Journal reported. Greek officials said they expected to seal a deal by Friday, when Greek Prime Minister George Papandreou meets in Berlin with German Chancellor Angela Merkel, but senior German officials insisted a bailout wasn't imminent.