EU help

European Union President Herman Van Rompuy announced after meetings Thursday there was "agreement" on a deal to help Greece cope with its debt crisis and avoid a broader destabilization of the euro currency. Leaders held back however on a hard cash bailout.

The finer aspects of the agreement will likely not be known until after EU finance ministers meet early next week. It's believed however that Germany and France will lead efforts to get the Greek economy back on its feet.

The EU's vague response to Greece's spiraling budget deficit was not enough to ease pressure on the euro however, with markets continuing their sell-off of the currency.

The announcement of a deal from Van Rompuy came after two hours of intense negotiations with German Chancellor Angela Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou.

Van Rompuy said Athens would have to take measures to slash government spending in return for help from EU countries, who would seek to "safeguard financial stability in the euro zone area as a whole."

He said that Greece would have to reduce its budget deficit, currently at 12.7 percent, by four percentage points this year. The EU has a budget deficit limit of three percent of gross domestic product for countries that use the euro currency.

Van Rompuy added that "the Greek government has not requested any financial support."

Show of support

Angela Merkel said "the European Union is not going to leave Greece on its own," adding however that "there are rules and these rules must be followed."

However, according to a report in British daily The Guardian, Merkel was behind efforts to resist a quick bailout for Greece. The paper quoted an unnamed EU official as saying that Merkel emphasized "that Athens would need to put its own house in order and brushed aside all questions of financial support."

Also present for the pre-summit talks were European Commission President Jose Manuel Barroso, European Central Bank President Jean-Claude Trichet, Eurogroup Chairman Jean-Claude Juncker and Spanish Prime Minister Jose Luis Rodriguez Zapatero, whose country currently holds the EU's rotating presidency.

Although details on what help the EU will give to Greece remained vague, it is thought either a bilateral loan, the creation of a credit line or governmental guarantees to underwrite Greek bond issues are possible solutions.

The fear is that if Greece's problems aren't nipped in the bud and the country's economy defaults because of its debts, this could seriously affect some of the other debt-laden economies that share the euro currency, such as Portugal, Spain and Italy.

dfm/hf/AP/Reuters
Editor: Andreas Illmer