The worst crisis in the history of the eurozone (EU countries which use the euro currency) will be on the table today, after French President Nicolas Sarkozy and German Chancellor Angela Merkel called for stronger monitoring of budget rules governing the 16-nation eurozone, in a joint letter published Thursday in Le Monde.
'Contagion' possible
European financiers are beginning to panic following the three month dithering by European leaders over the Greek crisi. Moody's ratings agency on Thursday warned that the fallout from the Greek debt crisis presented a risk of "contagion" for the credit rating of banks in Britain, Ireland, Italy, Portugal and Spain.
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
Moody's said in a report that "the potential contagion of sovereign risks to banking systems could spread to other countries such as Portugal, Spain, Italy, as well as Ireland and the UK."
It said these banking systems therefore faced "very real, common threats."
The report was referring to the risk of weaker sovereign debt in Europe on national banking system, rather than the direct effect of exposure to Greek government debt, which is concentrated in French and German banks.
But it could be the currency itself that is in danger.
Sanctions called for by France, Germany
At a summit on Friday, European leaders must agree on improved surveillance and on tighter sanctions for those countries that fail to keep their deficits under control, the leaders wrote in the newspaper.
The eurozone must also put in place a "robust framework" for dealing with crises to avoid a repeat of the 110b euro ($AU143b) bailout for Greece from Europe and the International Monetary Fund, they added.
"We must draw the lessons (from the Greek crisis) and take all the necessary measures to avoid that a crisis of this nature happens again," Sarkozy and Merkel wrote.
Leaders of the euro countries gather for a summit in Brussels on Friday amid fears that the common currency is under threat unless the debt-ridden region can enact profound reform.
During the second such eurozone summit in the currency's 11-year history, the leaders will sign off on a multi-billion-euro Greek bailout package and look at ways to try and prevent any repeat of the crisis.
Worries have crystallized around the so-called PIIGS - Portugal, Ireland, Italy, Greece and Spain - the eurozone's weakest economies.
The euro's been at the lowest level against the US dollar for a year, but European stocks rose Thursday and the euro pulled away from a new dollar low, lifted by Spain's successful bond auction and hopes of intervention to prop up the eurozone unit, analysts said.
Investors fretted over the Greek financial crisis and awaited the outcome of an ECB interest rate meeting and general election in Britain.
