European officials are calling for swift action to help debt-stricken Greece, in a bid to prevent further market turmoil and stop the debt crisis spreading.
Axel Weber, a member of the European Central Bank's governing council, was quoted today as saying the effects of letting Greece go bankrupt would be "incalculable."
Greek Prime Minister George Papandreou warned that his country's debt crisis was a small fire that could get out of control and prove "catastrophic" for the European and global economies.
That followed similar remarks by International Monetary Fund Chief Dominique Strauss-Kahn after talks in Berlin on Apirl 28 with the German government and European Central Bank President Jean-Claude Trichet.
"What is at stake is certainly today the economic situation of Greece, but it is more than that," Strauss-Kahn said, "because Greece is part of the eurozone, because of the solidarity system of the eurozone. It's the confidence in this zone which is at stake, and that is why we need to act swiftly and strongly."
German lawmakers who also met with Strauss-Kahn say he told them Greece alone may need a total of as much as 120 billion euros -- nearly three times the amount agreed so far under a planned joint IMF- eurozone rescue package.
U.S. President Barack Obama and German Chancellor Angela Merkel, speaking by telephone on April 28, agreed that "resolute action" is needed. Merkel says Greece's international bailout must be accelerated for the sake of the entire euro zone.
The calls come amid signs that Greece's debt crisis is spiraling out of control -- infecting markets from Rome to Madrid and raising concerns that Europe's problems eventually will affect areas outside of the euro currency zone. That led to the euro currency falling on April 28 to its lowest value in a year against the U.S. dollar.
Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development, likened Europe's crisis to the Ebola virus -- one of the most virulent viral diseases known to mankind.
He said Europe may need to come up with a plan equivalent to the $700 billion Troubled Asset Relief Program. That was the program implemented in the United States after the collapse of Lehman Brothers in 2008 ushered in the most intense period of the financial crisis.
Nouriel Roubini, the New York University professor who predicted the economic collapse of 2008, says the debt crisis that is spreading out from Greece is a warning sign for countries ranging from the United States and Japan to the United Kingdom.
Some economists, meanwhile, are urging European policy makers to come up with unprecedented measures to stave off the widening debt crisis.
Economists cited by Bloomberg say European governments may need to provide more than 600 billion euros in aid, or buy government bonds, in order to reign in the region's debt problems. The news service said other steps being urged are for governments to guarantee bonds and for the European Central Bank to revive the practice of unlimited lending to banks.
In a sign that Europe's problems are now spreading, Standard & Poor's credit rating agency downgraded Spain's rating to "double A," putting it at the level of Slovenia. That move came just a day after Standard & Poor's lowered Portugal's rating a notch and Greek bonds were downgraded to "junk."
Greek Prime Minister Papandreou says his country is not asking for a bailout. Rather, he said, Athens only wants help with more "reasonable terms" on loans than the market is offering now that Greece's sovereign debt rating is so low.
"This is not only a problem facing Greece," he said. "Nor is it a problem that Greece alone can solve and deal with. We know -- yes, that the European Union has its procedures -- and there has been much criticism about what Europe is or can do, and obviously we would have liked to have seen decisions more quickly.
"At the same time, we have made decisions in the European Union in the past month with the institutional, political restrictions -- much more quickly than almost ever before, and I think that is also a positive sign: what Europe can do."
But some European policy makers continue to play down signs that the debt crisis is spreading to other euro zone countries and could spread beyond.
France's Budget Minister Francois Baron said today that there is "no doubt" about the determination of the euro zone, the European Central Bank, the IMF, and the European Union to "ensure the stability of Greece and therefore the stability" of the common euro currency.
written by Ron Synovitz, with agency reports