The head of the European Central Bank called on euro zone leaders today to speak with one voice in the debt crisis, while defending German Chancellor Angela Merkel against accusations of foot-dragging.
'There is an absolute need to improve 'verbal discipline', Jean-Claude Trichet said in an interview with the Financial Times Deutschland, a transcript of which was released by the ECB.
'The governments need to speak with one voice on such complex and sensitive issues as the crisis,' he said, while acknowledging that having 17 different governments made things 'complex'.
'But speaking with one voice in a period of crisis is of the essence,' he added.
The Frenchman also defended Merkel against criticism that she, as the leader of Europe's biggest economy, had acted too slowly throughout the euro zone's sovereign debt crisis and had made matters worse.
'Not in the least,' Trichet said. 'I would see a discussion of this kind as being completely misplaced in the current situation.
Merkel had said yesterday that she would attend a summit of euro zone leaders in Brussels on Thursday - announced by EU president Herman Van Rompuy - to agree a new Greek rescue package only if there were a prospect of a concrete deal.
Today, Merkel's spokesman said that she was 'confident' a euro zone summit will take place this week and that it will send a 'strong signal to markets' that the euro can survive its biggest test to date.
'The government is working on all levels with all its strength on preparing for Thursday a good result, a decent result, a result that sends out a strong, and clear signal to the markets,' Merkel's spokesman Steffen Seibert said.
'Confident that this will be possible, the chancellor is planning her trip to Brussels,' he told a regular government briefing in Berlin.
Seibert said that the 17-nation euro zone is currently in a 'very difficult, very challenging phase... the first big test that this currency has had to face.'
'It will depend in the end on whether euro zone leaders can speak with one voice.
'The markets are testing whether there is unity - 'Are you going to hold together, are you really ready to rescue the euro in its first big test?''
Trichet also expressed confidence that the euro zone would overcome the current crisis, which has dragged Greece, Ireland and Portugal into bail-outs and which markets speculate could pull down Spain and Italy.
'Naturally the Europeans can manage the issue. It is not a question of technique. It is a question of will and determination,' Trichet said.
'The countries of Europe have always demonstrated that they pull together when the challenges are very high.'
Trichet also sounded a warning that any default on Greek sovereign debt as part of a second rescue package for Athens would mean that the ECB would not accept the country's bonds as collateral for loans.
Greek banks are heavily reliant on funding from the ECB and offer government bonds they own as collateral.
There are concerns that any restructuring of Greek debt being discussed by euro zone leaders, either through a debt rollover, swapping Greek bonds for new ones or a bond buy-back, could be seen rating agencies as a default.
'The governments have been warned,' Trichet said. 'If a country defaults, we will no longer be able to accept its defaulted government bonds as normal eligible collateral.'
Tánaiste Eamon Gilmore said today that he remains confident that EU leaders can reach a deal which should limit any contagion from a restructuring of Greek debt.
Mr Gilmore was speaking as foreign ministers met in Brussels this morning.
Geithner urges leaders to act
US Treasury secretary Timothy Geithner today urged European Union leaders to step up their efforts to deal with the risk of contagion.
'What Europe obviously needs to do is to work more forcefully to contain the risk of an escalating crisis in Europe,' Geithner said in an interview with business television network CNBC.
EU leaders have taken a number of steps in the last two weeks 'in that direction,' he said.
'Those things are all constructive, but the world needs to see the European leaders move now... to put in place those additional changes that would help contain the risk of a broader crisis,' the Treasury secretary said.
'They have the capacity to manage this in a way that doesn't add to the broader burdens in the global economy, and of course we want them to do that.'
Meanwhile, European markets were lower today as results of the European banking stress tests did little to assuage investors' concerns over the region's debt troubles, dampening appetite for riskier assets.
London's FTSE 100 index was down 1% this afternoon, while shares in Frankfurt were down 1% and Paris had dropped 1.4%. Shares on the Dublin market had dipped almost 4%.
The costs for the Italian and Spanish governments to borrow for 10 years rose to new record high levels today, despite the announcement of a euro zone summit on Thursday to fight the debt crisis.
The price of existing 10-year debt bonds fell on the market, automatically raising the fixed interest carried by these bonds as a percentage of the new lower price, indicating how much the governments would have to offer to borrow new money.
The rate or yield on 10-year Italian debt rose above 6%, widely considered to be a threshhold on financial markets, to 6.021%. The yield on 10-year Spanish debt rose clearly above 6% to 6.388%. These were the highest rates for these countries since the creation of the euro zone.
