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A pledge by the European Union to stand by crisis-hit Greece punctured hopes in the financial markets yesterday of a swift rescue and raised fears of renewed selling.

Efforts by Nicolas Sarkozy and Angela Merkel, the French and German leaders, to paper over differences between Berlin and Paris on how to deal with the Greek debt crisis led to a summit statement in Brussels that stopped short of providing immediate support for Athens.

The leaders of the 27-nation bloc promised “determined and co-ordinated action if needed to safeguard stability” of the eurozone, which has been shaken by turmoil in bond markets amid fears that Greece’s debt problems could spread.

The accord amounted to an implicit assurance to help Athens if it had problems in refinancing debt in April and May.

But the lack of a detailed bail-out plan underwhelmed investors in financial markets. While global stocks and bonds made modest gains, the euro fell 0.9 per cent against the dollar.

Herman van Rompuy, the EU’s permanent president, described the deal as a “political statement” saying leaders had not come up with a detailed rescue package because Greece had not asked for assistance.

Mr Sarkozy said: “We have committed to a show of solidarity, transparency and discipline.”

The EU endorsed Greece’s plans to cut its budget deficit by 4 percentage points of gross domestic product this year.

The agreement lays out a set of guidelines that Greece will be expected to follow if it were to be given financial support, most probably from Germany, France and some other eurozone countries. Athens would be expected to “do whatever is necessary including adopting additional measures” to eliminate the deficit by 2012.

“The EU stands by Greece,” said Ms Merkel. “But first and foremost, Greece must implement its [deficit reduction] programme.”

Berlin, traditionally the EU’s paymaster, is, acutely conscious that the German public is unlikely to welcome any initiative open to the interpretation that German taxpayers would pick up the bill for decades of Greek profligacy, manipulation of financial statistics, public sector corruption and tax evasion.

Jonathan Loynes, an economist at Capital Economics, said the agreement was “disappointing. It seems to amount to little more than a vague statement of support for Greece.” Steven Major, at HSBC, said: “It all hangs on whether the implicit guarantees go down well with the markets. If they don’t, then there could be a sell-off.”

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AAAAAAAAAA wrote:

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Babylon wrote: You can always come to Mexico!

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