EU Commission chief José Manuel Barroso has urged eurozone leaders to act decisively to solve the eurozone’s debt crisis or risk events spiralling out of control.
“Nobody should be under any illusions - the situation is very severe. It requires a response otherwise negative consequences will be felt in all corners of Europe and beyond.”
He made the comments on the eve of an emergency eurozone summit that has been downplayed by German chancellor Angela Merkel, who warned markets not to expect a big bang solution to Greece’s
“The situation requires full engagement by everyone at the summit,” Mr Barroso said today.
He called on leaders to agree the “visibility and limits” of private bondholder involvement in a second Greek bailout, which is expected to amount to around €120bn.
The issue has continued to thwart negotiators as ratings agencies threaten to declare Greece in default if creditors are forced to share in the cost of the rescue.
Mr Barroso also said there was a need for increasing the “scope for more flexible action” of the eurozone’s financial stability fund, which was agreed in principle by finance ministers last week.
The changes include lower interest rates and longer maturities to ease bailed-out countries’ debt burdens.
“Leaders need to come to the table saying what they can do and what they want to do and will do, not what they cannot do or will not do - that is what I ask from them,” Mr Barroso went on.
“It is in the self-interest of every member state to commit.”
“The euro is one of our greatest assets and the benefits far outweigh the efforts required by member states on different sides of the negotiation,” he added.
Mr Barroso also announced the Commission was sending a technical team to Greece to help the country absorb billions of euros of extra infrastructure funding to help the country get back on its feet.
The money was announced last week in an effort to boost growth.
Meanwhile, the EU's banking chief Michel Barnier has refused to be drawn on a plan to tax banks and create an insurance fund against a potential Greek default.
The tax is part of a menu of options, including cheaper and longer term loans and possible debt buybacks that are being mooted to help Greece shoulder its massive EUR350 billion debt burden.
"We are all engaged in a collective effort to solve the Greek problem and part of that effort will mean that the private sector has a role to play," Mr Barnier told reporters. "A number of ideas have been floated."
The Commission will propose a tax on financial transactions this autumn in a bid to raise more revenue for its own budget, which Mr Barnier said would be "easy enough, certainly bearable from an economic point of view and politically speaking it’s fair".