BRUSSELS (Reuters) – European Union leaders are poised to hold an emergency summit after finance ministers acknowledged for the first time that some form of Greek default may be needed to cut Athens’ debts and to stop contagion spreading to Italy and Spain.

“There will be an extra summit this Friday,” a senior euro zone diplomat told Reuters, suggesting policymakers have been seized with a new sense of urgency after markets started targeting Italian assets.

Worsening political tensions between Prime Minister Silvio Berlusconi and his Finance Minister Giulio Tremonti have caused markets to focus on Italy’s shaky banks and chances its budget deal could stumble, and to look afresh at Spain, the euro zone’s fourth largest economy.

Willem Buiter, chief economist at Citi and a former UK central banker, said there now was a clear danger of the debt crisis spreading beyond Greece, Ireland and Portugal, the three nations bailed out so far.

“We’re talking a game changer here, a systemic crisis,” he said. “This is existential for the euro area and the EU.”

Sucking Italy and Spain into the vortex would be hugely costly. He estimated that the European rescue fund would have to be expanded to a 2 trillion euro ($2.8 trillion) to help out struggling euro-zone countries if they are locked out of capital markets.

The International Monetary Fund called on Italy to take “decisive” steps to cut its fiscal deficit below 3 percent by 2012 and said its medium-term package is an “important step.

BRUSSELS (Reuters) – Euro zone finance ministers promised longer debt maturities and a more flexible rescue fund to help Greece and other EU debtors, but they set no deadline to act and the threat of contagion to Italy and Spain grew.

The ministers also declined to rule out the possibility of a selective default by Greece to make its debt mountain more sustainable, despite the European Central Bank’s fierce opposition to any move, one participant said.

After eight hours of talks on Monday following another day of turmoil on financial markets, ministers from the 17 euro zone countries promised new steps “shortly,” but disagreement about the precise nature of those steps barred them from taking immediate action.

Bond yields in Italy and Spain, the euro zone’s third- and fourth-largest economies respectively, remained under pressure on Tuesday with Italian 10-year bond now above the 5.7 percent area which bankers say will start putting heavy pressure on Italy’s finances.

Euro zone officials are hoping concrete decisions on Greece can be taken at another meeting later this month, but Germany’s finance minister, Wolfgang Schaeuble, said there was time until September, a date others say is too far off given the market onslaught against Italy.

“We have time on Greece,” Schaeuble told German radio station Deutschlandfunk. “The next tranche is due in September.

“By then a new program has to be decided,” he said.

BRUSSELS (Reuters) – The European Union’s top finance officials hold critical talks on Greece and the worsening situation in Italy on Monday, with concern about the risk of further sovereign debt contagion acute.

Herman Van Rompuy, the president of the European Council, will meet European Central Bank President Jean-Claude Trichet and Jean-Claude Juncker, the chairman of the Eurogroup, for talks in Brussels around midday (1000 GMT), ahead of a meeting of the 17 euro zone finance ministers later on Monday.

Van Rompuy’s spokesman described the gathering, which also includes European Commission President Jose Manuel Barroso and the EU’s economic and monetary affairs commissioner, Olli Rehn, as a “coordination, not a crisis meeting”, and said Italy would not be on the agenda.

However, senior EU sources said it would be impossible not to discuss the situation in Italy, the euro zone’s third largest economy, following a large sell-off in Italian assets that the Italian media have dubbed “black Friday”.

Shares in Italy’s biggest bank, Unicredit Spa, gyrated wildly on Monday after losing 7.9 percent on Friday, partly because of worries about the results of stress tests of the health of European banks that will be released on July 15. Other banks stocks also fell heavily.

The sell-off has increased fears that Italy, with the highest sovereign debt ratio relative to GDP in the euro zone after Greece, could be next to suffer in the crisis. If that came to pass, the euro zone’s existing rescue mechanism, the EFSF, would have insufficient funds to help.

The 10-year yield spread between Italian and German debt widened to a fresh euro-era high of 258 basis points on Monday and bond yields neared the 5.5-5.7 percent area which some bankers think could start putting heavy pressure on Italy’s finances.

BRUSSELS (Reuters) – The European Union’s top finance officials hold critical talks on Greece and the worsening situation in Italy on Monday, with concern about the risk of further sovereign debt contagion acute.

Herman Van Rompuy, the president of the European Council, will meet European Central Bank President Jean-Claude Trichet and Jean-Claude Juncker, the chairman of the Eurogroup, for talks in Brussels around midday (1000 GMT), ahead of a meeting of the 17 euro zone finance ministers later on Monday.

Van Rompuy’s spokesman described the gathering, which also includes European Commission President Jose Manuel Barroso and the EU’s economic and monetary affairs commissioner, Olli Rehn, as a “coordination, not a crisis meeting,” and said Italy would not be on the agenda.

However, senior EU sources said it would be impossible not to discuss the situation in Italy, the euro zone’s third largest economy, following a large sell-off in Italian assets that the Italian media have dubbed “black Friday.”

Shares in Italy’s biggest bank, Unicredit Spa, gyrated wildly on Monday after losing 7.9 percent on Friday, partly because of worries about the results of stress tests of the health of European banks that will be released on July 15. Other banks stocks also fell heavily.

The sell-off has increased fears that Italy, with the highest sovereign debt ratio relative to GDP in the euro zone after Greece, could be next to suffer in the crisis. If that came to pass, the euro zone’s existing rescue mechanism, the EFSF, would have insufficient funds to help.

The 10-year yield spread between Italian and German debt widened to a fresh euro-era high of 258 basis points on Monday and bond yields neared the 5.5-5.7 percent area which some bankers think could start putting heavy pressure on Italy’s finances.

BRUSSELS (Reuters) – European Council President Herman Van Rompuy has called an emergency meeting of top officials dealing with the euro zone debt crisis for Monday morning, reflecting concern that the crisis could spread to Italy, the region’s third largest economy.

European Central Bank President Jean-Claude Trichet will attend the meeting along with Jean-Claude Juncker, chairman of the region’s finance ministers, European Commission President Jose Manuel Barroso and Olli Rehn, the economic and monetary affairs commissioner, three official sources told Reuters.

Van Rompuy’s spokesman Dirk De Backer said: “It’s a coordination, not a crisis meeting.” He added that Italy would not be on the agenda and declined to say what would be discussed.

However, two official sources told Reuters that the situation in Italy would be discussed. The talks were organised after a sharp sell-off in Italian assets on Friday, which has increased fears that Italy, with the highest sovereign debt ratio relative to its economy in the euro zone after Greece, could be next to suffer in the crisis. A second international bailout of Greece will also be discussed, the sources said.

The spread of the Italian 10-year government bond yield over benchmark German Bunds hit euro lifetime highs around 2.45 percentage points on Friday, raising the Italian yield to 5.28 percent, close to the 5.5-5.7 percent area which some bankers think could start putting heavy pressure on Italy’s finances.

Shares in Italy’s biggest bank, Unicredit Spa, fell 7.9 percent on Friday, partly because of worries about the results of stress tests of the health of European banks that will be released on July 15. The leading Italian stock index sank 3.5 percent.

The market pressure is due partly to Italy’s high sovereign debt and sluggish economy, but also to concern that Prime Minister Silvio Berlusconi may be trying to undermine and even push out Finance Minister Giulio Tremonti, who has promoted deep spending cuts to control the budget deficit.

BRUSSELS (Reuters) – European Council President Herman Van Rompuy has called an emergency meeting of top officials dealing with the euro zone debt crisis for Monday morning, reelecting concern that the crisis could spread to Italy, the region’s third largest economy.

European Central Bank President Jean-Claude Trichet will attend the meeting along with Jean-Claude Juncker, chairman of the region’s finance ministers, European Commission President Jose Manuel Barroso and Olli Rehn, the economic and monetary affairs commissioner, three official sources told Reuters.

The talks were organized after a sharp sell-off in Italian assets on Friday, which has increased fears that Italy, with the highest sovereign debt ratio relative to its economy in the euro zone after Greece, could be next to suffer in the crisis. A second international bailout of Greece will also be discussed.

The spread of the Italian 10-year government bond yield over benchmark German Bunds hit euro lifetime highs around 2.45 percentage points on Friday, raising the Italian yield to 5.28 percent, close to the 5.5-5.7 percent areas which some bankers think could start putting heavy pressure on Italy’s finances.

Shares in Italy’s biggest bank, Unicredit Spa, fell 7.9 percent on Friday, partly because of worries about the results of stress tests of the health of European banks that will be released on July 15. The leading Italian stock index sank 3.5 percent.

The market pressure is due partly to Italy’s high sovereign debt and sluggish economy, but also to concern that Prime Minister Silvio Berlusconi may be trying to undermine and even push out Finance Minister Giulio Tremonti, who has promoted deep spending cuts to control the budget deficit.

“We can’t go on for many more days like Friday,” a senior ECB official said. “We’re very worried about Italy.”

BRUSSELS, July 8 (Reuters) – Efforts to secure the private sector’s involvement in a second bailout of Greece have stalled and there is little chance of reaching the 30 billion euros target figure, euro zone diplomats said on Friday.

Germany, the Netherlands and other northern euro zone states demand the private sector must bear a portion of the cost of a second package of loans to Greece so that the burden does not fall solely on the public sector and taxpayers.

The aim is to get private creditors — banks, pension funds and insurance companies — to provide around 30 billion euros ($43 billion) to a total package of around 110 billion euros by rolling over their holdings of Greek bonds when they mature.

The remainder would come from Greek privatisation receipts and from the EU and IMF, which would stump up around 60 billion.

But two weeks of negotiation among EU officials, the European Central Bank and bankers represented by the Institute of International Finance (IIF) have made almost no progress, with only the outline of private sector proposals on the table.

“We may not be all the way back at square one, but we’re pretty close,” said one senior euro zone official.

“It’s pretty hard to see how they’re going to get the private sector involvement the Germans want.”

BRUSSELS (Reuters) – Europe issued a full-throated assault on credit ratings agencies on Wednesday, saying there were signs of bias against the European Union after Moody’s downgraded Portugal’s debt to “junk” status.

European Commission President Jose Manuel Barroso said Moody’s decision to lower Portugal by two notches and maintain a negative outlook was fuelling speculation in financial markets. Europe was looking at getting away from its reliance on the mainly U.S.-based ratings companies, he added.

“Yesterday’s decisions by one rating agency do not provide more clarity. They rather add another speculative element to the situation,” Barroso told reporters, adding that the agencies were not immune to “mistakes and exaggerations”.

“It seems strange that there is not a single rating agency coming from Europe. It shows there may be some bias in the markets when it comes to the evaluation of the specific issues of Europe,” he said, stating publicly a view that many senior EU officials have pushed privately for some time.

It is not the first time during the sovereign debt crisis that the EU has taken the major agencies — Moody’s, Standard & Poor’s and Fitch — to task, but the message this time was delivered with a much greater sense of frustration.

Barroso’s comments followed German Chancellor Angela Merkel’s brushing aside on Tuesday of a warning from S&P, the largest agency, that it would view the current French plan for a partial rollover of maturing Greek debt as a default.

Such a move would narrow the options available to EU leaders to tackle the crisis and could greatly exacerbate the situation.

BRUSSELS (Reuters) – Euro zone finance ministers agreed on Saturday to disburse a further 12 billion euros ($17.4 billion) to Greece and said the details of a second aid package for Athens would be finalised by mid-September.

After a conference call, the 17 euro zone ministers agreed that the fifth tranche of the 110-billion-euro bailout agreed with Greece in May 2010 would be paid by July 15, as long as the IMF’s board signs off on the disbursement. The IMF is expected to meet on July 8 to approve it.

The payment will allow Greece to avoid the immediate threat of default, but the country still needs a second rescue package, which is also expected to total around 110 billion euros and which will now likely only be finalised in September.

Between now and then, finance ministers will work on the “precise modalities and scale” of the private sector’s involvement in the second aid package, which Germany hopes will eventually total around 30 billion euros.

Greece said it expected a final decision on a second bailout programme by mid-September to keep the country financed.

Eurogroup decided through a teleconference today to work out a new programme on time, before mid-September,” Greek Finance Minister Evangelos Venizelos said shortly after the finance ministers approved the 12 billion euro disbursement.

“What is crucial now is to implement parliament’s decisions on time and effectively,” he said.

BRUSSELS, July 2 (Reuters) – Euro zone finance ministers agreed on Saturday to disburse a further 12 billion euros to Greece and said the details of a second aid package for Athens would be worked out in the “coming weeks”.

After a conference call among the 17 euro zone ministers, it was agreed that the next, fifth tranche of a 110-billion-euro bailout agreed with Greece in May 2010 would be paid by July 15 as long as the IMF’s board signs off on the disbursement.

The IMF is expected to meet on July 8 to discuss it.

“The Greek authorities provided a strong commitment to adhere to the agreed fiscal adjustment path and to the growth-enhancing structural reform agenda,” Jean-Claude Juncker, the chairman of the Eurogroup, said in a statement approving the release of the next aid payment.

“Ministers call on all political parties in Greece to support the programme’s main objectives and key policy measures in order to ensure a rigorous and swift implementation.”

The statement added that the “precise modalities and scale” of the private sector’s involvement in a second aid package for Greece, again expected to total 110 billion euros, would be determined in the “coming weeks”, after further consultation.

While the 12 billion euro payment will help Athens cover a bond redemption of 5.9 billion euros in August, the government still has a monumental hill to climb if it is to return to debt sustainability, with its debt-to-GDP ratio above 150 percent.