European banks meeting on second Greek bailout (AP)

PARIS – The biggest banks in the eurozone met Wednesday to hash out ways to contribute to any new financial rescue package for Greece, as trouble in Portugal revived worries about Europe's financial health and hit stock markets in Spain and Italy.

The meeting of senior executives from top European banks in Paris ended with no public announcement of a deal, but plans for further discussions in the weeks ahead.

European governments are trying to seal a new bailout package for Greece by September to help the government pay its bills and avoid a default whose effects could ripple worldwide.

Even before a new package is in place, concerns about Greece could cause investors to pull money out of other vulnerable eurozone states, such as already bailed-out Portugal and Ireland as well as much larger Spain and Italy.

Portugal's financial plight deepened Wednesday as the interest it pays on loans jumped higher and its stock market slumped, a day after its government bonds were downgraded to junk status. Stocks fell all round Europe, but especially in Spain and Italy too.

The bankers' private talks in Paris, under the auspices of the Institute of International Finance, ended in the early afternoon, spokesman Frank Vogl said, without revealing what if anything was decided.

"This was seen as part of a series of meetings and there will of course be further meetings," he said.

The bankers' main task is to come up with terms under which they would be prepared to buy up new Greek bonds, currently seen as one of the riskiest investments in the world.

The IIF said in a statement last week that the bankers would discuss a voluntary rollover of Greek bonds, and that the goal is to provide "significant cash-flow support to Greece during 2012-14 on the basis of broad-based voluntary participation by private investors."

Eurozone governments want substantial private-sector contributions to a new rescue deal for Greece, so the whole burden doesn't fall on taxpayers, many of whom are angry at having to bail out a country long seen as sloppy with its finances.

German Finance Minister Wolfgang Schaeuble insisted Wednesday that the private sector will have to play a central role in the new Greek aid package and noted that Europe's biggest economy was prepared to work on the basis of a recent proposal from French banks.

Under the French proposal, banks would reinvest 50 percent of their holdings in new Greek bonds with a maturity of up to 30 years and being secured by a separate safety fund.

Schaeuble added that "there are also a lot of arguments for alternatives, and we will have to discuss that calmly but thoroughly by September." He didn't elaborate.

France's new Finance Minister Francois Baroin said Wednesday that a plan worth somewhere in the region of euro100 billion ($144.6 billion) should be ready for September.

Baroin said he will go to Berlin on Thursday for talks with Schaeuble.

The European Commission has said that Greece will need an extra euro115 billion ($166 billion) through the middle of 2014, on top of the euro110 billion ($159 billion) from European governments and the International Monetary Fund granted a year ago — although some of that financing will come from the sale of public assets and the private-sector contribution.

Eurozone governments are keen to make sure that any rollover of Greek debt by the banks is not considered a default by credit rating agencies. No eurozone country has ever been considered to be in default of its debt, and the European Central bank fears that such a negative rating could undermine investor confidence in banks throughout the currency union.

Though last week's decision by the Greek Parliament to back further austerity measures in return for crucial bailout funds has helped calm jitters in the markets, Europe's debt crisis is likely to remain a major concern for investors.

The decision by Moody's to downgrade Portugal to junk status late Tuesday weighed on European stocks and the euro Wednesday. The agency said the country will find it difficult to meet its targets and that it too may need a second bailout.

In Greece, strike action remains a major obstacle to the government's program. On Wednesday, taxis across Greece are holding a 24-hour strike to protest the opening of their profession to more competition.

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Geir Moulson in Berlin and Gabriele Steinhauser in Brussels contributed to this report.

European stocks, euro rebound on Greece progress (AFP)

LONDON (AFP) – European stocks rebounded and the euro recovered against the dollar on Friday as investors cheered a breakthrough in the eurozone's bid to resolve Greece's debt crisis, analysts said.

World markets had slumped on Thursday as weak US and Chinese data dented confidence in the global economic outlook and as Greece's problems dragged on.

However they swiftly recovered on Friday after Greece, the EU and the IMF agreed on the final details of a 28-billion-euro ($40-billion) savings plan which Athens must implement over five years to obtain cash to pay its immediate debts.

In late morning deals, London's benchmark FTSE 100 index of top shares jumped 1.27 percent to 5,746.33 points. Frankfurt's DAX 30 climbed 1.12 percent to 7,229.37 points and in Paris the CAC 40 gained 0.46 percent to 3,805.30.

The euro climbed to $1.4293 from $1.4257 late on Thursday in New York. The dollar fell to 80.16 yen from 80.52 yen.

Oil prices meanwhile steadied after plunging one day earlier when the International Energy Agency decided to tap emergency crude reserves to make up for lost Libyan supplies.

But in Italy, leading bank shares slumped up to 8.0 percent.

Markets recovered on Friday "after positive sentiment coming out of Europe as EU ministers say they will do 'anything it takes' in relation to Greece," said Spreadex trader Simon Furlong.

"However, we are not out of the woods yet. With disappointing jobs figures in the US, (Federal Reserve chairman) Ben Bernanke downgrading US growth output and a large opposition to austerity measures within Greece's parliament, the light at the end of the tunnel is very dim indeed."

The European Commission said the deal among international backers on the ground in Athens now has to be "translated into concrete legislative measures" by Greece. Prime Minister George Papandreou is hoping that parliament will next week approve his austerity measures.

Meanwhile worries about the global economy were stoked after the US Labor Department on Thursday reported an unexpected increase in initial jobless claims, by 9,000 to 429,000 in the week to June 18. Elsewhere, the Commerce Department said new-home sales fell 2.1 percent in May.

Ahead of the data, Bernanke had on Wednesday warned of economic headwinds that could persist for longer than expected.

US stocks ended mixed on Thursday after steep initial losses spurred by the series of gloomy economic reports from the United States, Europe and China.

Tokyo's benchmark Nikkei-225 index closed up 0.85 percent at 9,678.71 points on Friday.

"The financial markets have stabilised," noted Derek Halpenny, European head of currency research at The Bank of Tokyo-Mitsubishi UFJ.

"Concerns over a number of factors remained elevated however, and next week brings the crucial austerity votes that appear to require not just a win but a win that signifies some degree of unity in Greece in favour of the austerity program."