EU rallies to Greek support on debt

Pressure eased on Greek leaders overnight, with pledged support from fellow EU leaders easing pressure on the country's ailing sovereign bonds - although the EU is still stopping short of offering immediate help.

The yield on 10-year Greek bonds fell to 5.912 percent at 1700 GMT compared to 6.004 percent at the same time on Wednesday. Bond prices and yield move in opposite directions.

No concrete measures from EU

While the European Union signalled it would use "determined" measures to defend its core, 16-nation eurozone, the stance was, however, not enough to prevent both the currency and European stocks from falling.

EU president Herman Van Rompuy, chairing his first summit, said an expression of "crystal clear political will" had been set down, one that translates into monthly policing by Brussels of Greece's deficit reduction.

"The Greek government believes they do not need financial support," insisted European Commission chief Jose Manuel Barroso, who urged an end to "speculation" about bailout "scenarios that are so far not present".

Van Rompuy also said that coming through with hard cash "is not necessary today", after a deal brokered between German Chancellor Angela Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou.

"Euro area member states will take determined and coordinated action if needed to safeguard the financial stability in the euro area as a whole," the 27 EU heads of state and government said in an agreed declaration.

Papandreou, who had appealed beforehand for "psychological" and "political" support from his peers, said firm backing from Brussels was a clear warning to market speculators.

Of the monthly monitoring from Brussels, Papandreou admitted a loss of credibility on markets means "the best answer" Athens can give traders is "transparency".

But he alluded to fears of deepening social unrest after a series of strikes by adding: "We will try to protect the weakest people in Greece. They are not guilty for this international crisis."

Greece, Portugal, Ireland, Italy and Spain have all triggered nerves on markets that were seeking strong signals to avert growing fears that the debt contagion could spread further.

But the news from Brussels was met with "a measure of indifference", said Patrick O'Hare at Briefing.com.

In afternoon trading the euro fell to $US1.3644, from $US1.3732 late in New York on Wednesday. While the stock exchange in London was narrowly up, Paris and Frankfurt were both down.

Greece to take further action

Greece has promised to do "whatever is necessary, including additional measures" to meet its targets, Van Rompuy said.

To begin with, it will have to reduce its public deficit this year by four percentage points from the current 12.7 per cent, which is more than four times the limit laid down by Brussels.

The inspections by commission and European Central Bank officials will begin in March, and will also "draw on the expertise of the International Monetary Fund," Van Rompuy said.

"I appreciate the commitment made by Eurogroup members to coordinate eventual action if necessary to safeguard the financial stability of the eurozone," said ECB chief Jean Claude Trichet.

The IMF also welcomed what it said were "important new steps in response to the challenges" Greece faces.

The prospect of a default has stalked markets for weeks, with the cost of borrowing shooting through the roof for Athens, but Luxembourg premier Jean-Claude Juncker insisted such an outcome "need not be envisaged".

Juncker said the "fine details" of precise financial instruments with which to help Greece out of the morass have still to be polished, but said aid would be "coordinated" at national level, essentially via loans and guarantees, and ruled out the creation of new eurobonds.

Merkel said the bloc was "not going to leave Greece on its own", but warned: "Rules are rules and the rules must also be respected."

Prime Minister Gordon Brown of Britain, which has promoted an IMF bailout solution, said it is "up to the euro area" to sort out the Greek crisis, where public debt is estimated at about 300 billion euros ($A471 billion).

Finance ministers from the euro countries meet in Brussels on Monday to refine strategies for dealing with the crisis, which has sent the euro sliding against the dollar over recent months.