Pressure mounts on european leaders to solve greek crisis, boostgrowth, ensure stability

Leaders have said that everything will be on the table, including adiscussion about whether 17 countries that use the euro shouldborrow money jointly — issuing so-called "eurobonds." But expectations were low for agreement on concrete measures toboost growth and stability in the eurozone. Europe's main stockindexes plunged more than 2 percent. The euro fell 0.8 percent to$1.2561, its lowest in nearly two years. On Tuesday, the Organization for Economic Cooperation andDevelopment became the latest body to warn that the eurozone is atrisk of falling into a "severe recession" and suggest that it slowthe pace of austerity, or cost-cutting measures, in some countries.

That's exactly what many in Greece are asking for. The country hasundertaken massive spending cuts and tax hikes to slash its deficitand rein in its debt — and in exchange for the bailout loansthat help keep it paying the bills. But Greece is now in its fifthyear of recession, and many argue the country cannot hope for arecovery if it sticks to the deal. In a recent election, neither of Greece's two main parties, both ofwhich support the bailout deal, fared well. Instead, minor partiesthat are threatening to renege on those commitments saw theirpopularity surge.

A new round of elections is set for June 17. It is now a question of who will blink first. If the Greeks pick ananti-bailout government and renege on the terms of the bailout, thecountry could be forced into a messy exit of the euro. That couldirreparably fracture the common currency.

Some European countries are already hinting that Greece should begiven better terms. Both the International Monetary Fund and theOrganization for Economic Cooperation and Development have said thepace of austerity measures should be slowed in some countries toreduce the risk of severe recession. European Union leaders are nonetheless presenting a united frontand leaving it up to the Greek people to decide their future inEurope. "Greece has to make an important choice on June 16, and theirchoice has to be European," French President Francois Hollande saidas he headed into Wednesday's meeting. "France wants that theGreeks stay in the eurozone, and the Greeks must respect theircommitments.

At the same time, the eurozone must show it supportsGreece." That question will no doubt be central to Wednesday's discussions,although little is expected from the meeting — which istechnically only meant to set up a summit in late June. Slow growth and uncertainty over Greece is making things worse forother struggling eurozone countries, like Spain, whose borrowingrates are high — and rising — because of fears that itsgovernment finances might be overwhelmed by the costs of rescuingits ailing banking sector. In a meeting early Wednesday with Hollande, Spanish Prime MinisterMariano Rajoy warned that his country couldn't continue much longerwith its current high borrowing rates. High borrowing rates are atthe heart of Europe's crisis and are what caused Greece, Irelandand Portugal to seek bailouts.

"Europe has to come up with an answer," Rajoy said in Paris. "It isa must, because we cannot go on like this for a long time, withlarge differences when it comes to financing ourselves." Rajoy suggested the European Central Bank resume some of itsemergency measures, such as buying the bonds of weak countries,which has the impact of lowering countries' borrowing rates. TheECB has suspended the purchases because, as an independent body, itdoes not want to be seen supporting governments directly. Instead,it has given European banks massive amounts of cheap loans tobolster confidence in the financial system.

Leaders will also be addressing ways to buoy growth, likeunleashing unused EU funds, increasing the financing of theEuropean Investment Bank, which could then give loans to companies,and issuing "project bonds," debt that would be invested in largeinfrastructure projects. Hollande said at his meeting with Rajoy that he will formallypropose so-called eurobonds — debt issued jointly by eurozonecountries — at Wednesday's summit. Such bonds would distribute the risk of debt across the wholeeurozone. That would mean every country would borrow at the samerate — giving financially weak countries a huge discount overtheir current rates.

German Chancellor Angela Merkel is staunchlyopposed to such a move because it would reduce the pressure onheavily indebted governments to heal their finances. "I believe that they are not a contribution to foster growth in theeurozone because the very similar interest rates which we had overmany years, have basically led to grave wrong developments," shesaid as she headed into Wednesday's meeting. ___ Raf Casert in Brussels, Thomas Adamson and Sylvie Corbet in Paris,Geir Moulson and Juergen Baetz in Berlin and Daniel Woolls inMadrid contributed to this report.

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