MercoPress. South Atlantic News Agency

Desperate efforts to avoid Greek default; Moody’s cuts ratings of leading French banks

Societe General and Credit Agricole are highly exposed to Greece

Moody's cut the credit ratings of two French banks Wednesday because of their exposure to Greece's debt, highlighting growing risks to Europe's financial sector from the deepening euro zone sovereign debt crisis.

The one-notch downgrade of Societe Generale and Credit Agricole came hours before the leaders of Greece, France and Germany held a video conference on measures to head off a possible Greek default, which has prompted rising global alarm over the potential fallout.

China added its voice today to US concerns over Europe's apparent inability to stop the debt mess from growing, while Indian and Brazilian officials said major emerging economies were discussing increasing their euro debt holdings.

Moody's kept BNP Paribas on review for a ratings downgrade saying the bank's profitability and capital base provided an adequate cushion to support its Greek, Portuguese and Irish exposure.

France's biggest bank announced a plan to sell 70 billion euros in assets to help ease investor fears about leverage and funding that hit its two main rivals. Shares in all three big French banks fell in early trading.

With senior European and International Monetary Fund inspectors due in Athens on Monday to check Greece's faltering compliance with its bailout program, Chancellor Angela Merkel and President Nicolas Sarkozy pressed Prime Minister George Papandreou to enforce unpopular austerity plans to meet fiscal targets.

Sarkozy told his cabinet France would do everything in its power to save Greece. While Europe's leaders struggle to avert a first default in the 12-year-old single currency area, the head of the European Union's executive challenged them to prepare for a great leap forward in fiscal integration that would be deeply divisive.

European Commission President Jose Manuel Barroso said Brussels would soon present options for the introduction of common Euro area bonds -- fiercely opposed by Germany and other north European creditor states. In an emotional plea for closer union, particularly in the 17-nation Euro area, Barroso told the European Parliament the only way to reverse the negative cycle in financial markets was to deliver deeper integration.

“Today I want to confirm that the Commission will soon present options for the introduction of Euro-bonds. Some of these could be implemented within the terms of the current treaty, and others would require treaty change,” he told lawmakers.

“This will not bring an immediate solution for all the problems we face, and it will come as an element of a comprehensive approach to further economic and political integration,” he said.

Chinese Premier Wen Jiabao said Beijing was willing to help its biggest trading partner, but added that Europe must stop the crisis -- which now threatens Italy – from growing.

“What we have to take note of now is to prevent the sovereign debt crises from spreading and expanding further,” Wen said today in an apparent response to pleas to buy more euro zone government bonds.