European Central Bank (ECB) President Jean-Claude Trichet will cut short a trip to Australia to attend a special EU summit as concerns heighten over a debt crisis in the bloc.
EU leaders are due to meet tomorrow in Brussels for a special summit on the economy under pressure to restore confidence among investors worried that rising debt in Greece, Portugal and other weaker states in the euro zone could undermine the global recovery.
The summit was called in early January and Trichet had been expected to spend both today and tomorrow in Australia at central bank meetings. Instead, he is leaving early, officials at the Reserve Bank of Australia and the ECB said.
PHOTO: BLOOMBERG
“There is a possibility that the EU could get the ECB involved and support Greece,” said Ayako Sera, market strategist at Sumitomo Trust Bank. “Fiscal concerns that have also spread to Spain and Portugal could temporarily ease if we get something on Greece.”
The euro inched up on news of Trichet’s changed travel plans, although it remains marred near a nine-month low of US$1.3583 hit on Friday.
It has fallen more than 6 percent since mid-December when ratings agencies first downgraded Greece.
Investors have shifted funds out of riskier assets into so-called safe havens, including the Japanese yen and the Swiss franc. Yields on Greek, Portuguese and Spanish debt and the cost of insuring against default have risen sharply.
The EU usually holds four summits a year, when all 27 heads of state or government gather in Brussels. The first summit, scheduled for March, normally focuses on economic issues.
But EU President Herman Van Rompuy, who can convene a special summit at any time if there are pressing issues, called for the meeting saying the bloc needed more economic growth in order to finance its social model on a sound basis.
Eurozone finance ministers, facing the bloc’s first debt crisis in the 11-year-old currency union, tried to calm investor fears over the risk of sovereign default in peripheral states at a G7 meeting in Canada over the weekend.
They said they would ensure Greece kept to a plan to cut its budget deficit to below 3 percent by 2012 from 12.7 percent last year, the euro zone’s biggest gap.
Trichet, who attended the G7 meeting, expressed confidence in the Greek plan. But the G7 comments did little to lift investor appetite for risk.
The Dow Jones industrial average closed on Monday below 10,000 points for the first time since November, weighed down by the euro debt woes.
The MSCI index of Asian shares outside Japan slid to a five-month low yesterday.
“Sentiment is still weak amid deepening concerns about southern European nations’ sovereign rating risks,” said Juhn Jong-kyu, a market analyst at Samsung Securities in Seoul.
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