EU calls crisis meeting over Greece

The European Union has called a crisis summit as Greece's mounting debtcrisis hit global markets amid fears that more countries would besucked in.

The European Union has called a crisis summit as Greece's mounting debt crisis hit global markets amid fears that more countries would be sucked in.

Greece acted to stop speculators operating on the Athens stock exchange as the interest rate it has to pay to borrow money shot above 10 percent.

Meanwhile the Australian share market closed firmly lower on the double-whammy of lower commodity prices and credit ratings downgrades for Greece and Portugal.

At the 1615 AEST close the benchmark S&P/ASX200 index had fallen 57.2 points to 4,822.8 points while the broader All Ordinaries index had dipped 59.1 points to 4,854.2 points.

Amid growing opposition to huge spending cuts, Greece's efforts to meet a May 19 deadline to repay nine billion euros (12 billion dollars) in debt took a critical new blow when the Standard and Poor's ratings agency downgraded its debt to "junk" status on Tuesday.

Standard and Poor's also slashed Portugal's rating and markets around the world took fright.

Tokyo markets fall

The Tokyo stock market fell 2.57 percent and other Asian markets also suffered after New York's overnight falls. The main European bourses were hit by fresh losses when they reopened Wednesday.

With the euro also falling against the dollar, EU President Herman Van Rompuy said leaders from the 16 nations using the euro currency would meet in Brussels around May 10 to try to agree a massive rescue operation.

Speaking at an EU-Japan summit in Tokyo, Van Rompuy said there was "no question" of Greece defaulting and insisted that talks were advancing to enable Greece to tap up to 45 billion euros in loans from the EU and the International Monetary Fund.

'Negotiations going on'

"The negotiations are going on. They are well on track and there is no question about restructuring of the debt," he said.

But European leaders face difficult talks and Greek Finance Minister George Papaconstantinou accused Europe of dragging its feet over the aid. He warned that the May 19 deadline was "crucial."

The S&P downgrade means certain investors such as pension funds can no longer buy Greek bonds.

But the government is also under intense pressure at home, with the General Workers Confederation announcing a general strike for May 5 against "neo-liberal blackmail" by the EU and IMF.

Radio technicians strike

Greek radio technicians launched a 48-hour strike on Wednesday, halting news broadcasts, while disgruntled applicants for civil sector jobs protested outside the finance ministry and teachers also launched stoppages.

On Tuesday, a Communist protest blocked nearly 1,000 tourists at Piraeus harbour, delaying their cruise ship's departure by around 10 hours.

The Athens stock exchange on Wednesday declared a two-month ban on short-selling after the yield on the country's benchmark 10-year bonds -- the rate which Greece must pay to borrow funds on financial markets -- jumped to over 10 percent, its highest level since Greece joined the eurozone.

Short selling is the sale of securities or commodity futures not actually owned by a seller who hopes to buy them back later at a lower price. Such speculation usually intensifies during a financial crisis.

Portuguese stocks tumble

The Portuguese stock market plunged 5.71 percent in early trade Wednesday, a day after its credit rating was slashed two notches to A- amid fears it could follow Greece into a debt crisis.

Standard & Poor's said Portugal's outlook was negative because of the country's fiscal and economic structural weaknesses.

"It is a decisive moment. The country must respond to this attack from the markets," Finance Minister Fernando Teixeira dos Santos said after the Lisbon market also fell more than five percent on Tuesday.

Germany would be the biggest contributor to any EU fund for Greece but helping a country which has let its public deficit hit 13.6 percent of gross domestic product (GDP), according to EU figures, is hugely unpopular in Germany, which will hold key regional elections on May 9.

Fears mount over Greece's finances

Despite its hesitation, German Finance Minister Wolfgang Schaeuble said the rescue plan must be implemented to send a clear signal that Greece would not be allowed to fail.

IMF chief Dominique Strauss-Kahn also said there was "no other solution" than a bailout for Greece, despite its "years of reckless overspending," according to the French daily La Tribune.

European Central Bank chief Jean-Claude Trichet ruled out a debt default by Greece or any other eurozone country, saying that was "out of the question" despite the alarm on financial markets.

But the Portugal downgrade, a weak showing by an Italian bond issue and a 4.19 percent fall in Spanish stocks has added to investor alarm.

"There is a contagion effect from Greece," said Estefania Ponte, head of the economy and strategy department at BNP Paribas Fortis in Madrid. "Greece, Portugal and Spain are in the line of fire."