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Euro summit to discuss Greek debt

Greece, France and Germany are to discuss ways to contain the spiralling debt crisis and prevent it from further shaking up global financial markets.

Fears in recent days that Greece was heading rapidly towards a chaotic default have sent the interest rates on 10-year government bonds soaring to new record highs.

German Chancellor Angela Merkel sought to calm fears this week and distanced herself from comments by her vice chancellor and others who suggested a Greek bankruptcy was possible.

Ms Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou are to discuss the situation in a teleconference, after a government meeting Mr Papandreou called to address urgent fiscal reforms. The finance ministers from the wider 17-nation eurozone will meet on Friday in Poland.

Hours before the conference, Mr Sarkozy and his prime minister "with a single voice reaffirmed France's determination to put everything in place to save Greece," a government spokeswoman said.

Mr Sarkozy wants the call to focus on "the need for efforts in return and commitment from Greece," she said.

Traders nevertheless hoped that some form of new support would emerge and pushed Greek shares higher.

The main fear of a Greek bankruptcy is that it could destabilise other financially troubled European countries, potentially causing a defaults in Portugal, Ireland, Spain or Italy. It would also have a knock-on effect on banks, many of which are which are large holders of Greek government bonds.

Moody's rating agency downgraded the credit ratings of two French banks, Societe Generale and Credit Agricole, after a period of huge volatility in the markets as investors fret about exposure to Greek debt.

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