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European officials are considering steps previously rejected by Germany, including the use of precautionary credit lines, to prevent the spread of the region’s debt crisis, a person close to the talks said.
“There needs to be a program with a certain amount of shock and awe to impress the market that the leaders are on top of the crisis,” said Robin Marshall, a London-based money manager at Smith & Williamson Investment Management in London.
With Greek Prime Minister George Papandreou saying in an interview yesterday that leaders face a “make-or-break” moment at the summit, success hinges on going beyond a second Greek package, which national officials continue to work on today. The IMF said yesterday that Greece’s crisis still risks contaminating the rest of the euro region even if officials avert a default there.
The main sticking point is how to get bondholders and banks to foot a share of the bill without sparking a new wave of financial turmoil. European Central Bank President Jean-Claude Trichet says any default risks sparking a crisis on a par with the collapse of Lehman Brothers Holdings Inc. German policy makers, who are reluctant to keep forcing their taxpayers to aid the spendthrift, signal a restructuring may be unavoidable.