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Greek PM George Papandreou (R) and European Socialists President Poul Nyrop Rasmussen (L) address the media ahead of an EU summit in Brussels, 25 Mar 2010
European Union leaders are meeting for a two-day summit in Brussels amid strong pressure for them to shore up Greece's ailing economy.
The Greek debt crisis is not on the formal agenda of the Brussels summit. But it is expected to dominate discussions among leaders of the 27-member European Union, along with concerns about other ailing EU economies.
There is intense pressure to come up with some kind of agreement to shore up Athens, which has faced protests and other social unrest since launching a tough austerity plan. A strong signal from Europe could help restore investor confidence that would allow Athens to borrow money internationally at a 3 percent rate, half of what the markets are now demanding.
Greek Economic Minister Georgios Papaconstantinou laid out that argument to reporters last week.
"What we have always asked for is political support in order to continue to be able to have access to markets at reasonable borrowing rates, so that the efforts of Greek citizens in terms of the difficult measures we are taking at the moment are not spent in higher interest rates to our borrowers," he said.
European Economic and Monetary Affairs Commissioner Olli Rehn also warned this week that Greece's economic woes threaten the euro currency, which slid to a 10-month low Wednesday against the dollar. He said it is critical the 16 nations that share the euro come to an agreement.
But Europe's biggest economy, Germany, has balked at bailing out Greece. It wants Athens to take responsibility for years of overspending. There is also talk of having the International Monetary Fund step in, but critics say that would send a signal that the eurozone is incapable of solving its problems on its own.
The chief economist at the Center for European Reform in London, Simon Tilford, believes E.U. leaders will come up with some kind of minimum deal in Brussels. But he thinks it will fail to give Greece the support it needs nor will it offer long-term solutions for other struggling European economies.
"I think Greece faces a very, very tough time," he said. "They are going to struggle to retain the confidence of the financial markets. They will be able to borrow, but it is going to be a huge premium, which is going to make it very difficult to strengthen their public finances," he added.
Portugal and Spain are also facing tough economic times. On Wednesday, a top ratings agency, Fitch Ratings, downgraded Portugal's long-term debt rating and gave it a negative outlook.
