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Greece Must Stick To Agreed IMF/EU Package - Barroso

The Euro area is ready to support Greece but the country needs to stick to the agreed package of 26-27 October and continue to implement the IMF/EU programme, said European Commission President Jose Manuel Barroso speaking at the G20 summit in Cannes.

"This needs to be crystal clear. We want Greece to remain in the Euro," said Barroso.

In the context of the wider sovereign debt crisis in the EU, Europe's strategy has five elements, he said. The elements include a firewall against contagion: "We have agreed to multiply up to fivefold the firepower of the European Financial Stability Facility rescue fund. The leverage could be around 1 trillion Euro," said Barroso.

The second step is a sustainable solution for Greece, comprising a substantial reduction of its debt with a voluntary contribution of private creditors, he said.

"Third, regarding the European banking sector, we decided on a co-ordinated scheme to recapitalise banks across Europe. Fourth, we have ensured further fiscal consolidation by those EU states that need more sustainable public finances and more structural reforms," said Barroso.

Finally, the EU has reformed and strengthened economic governance among the countries that form the Euro area, he said. The reforms have far reaching new measures for budgetary surveillance and economic policy coordination, and a political commitment to go beyond to strengthen the economic union.

"We will strengthen the economic union to make it commensurate with the monetary union," said Barroso.

Financial markets were on tenterhooks amid rumours that Greek Prime Minister George Papandreou may resign in the face of resistance to a referendum on a 50 percent haircut of Greek sovereign debt.

After promises he would form a consensus government, Papandreou won a vote of confidence in the Hellenic Parliament on the devaluation proposal despite appearing to have lost his parliamentary majority after two PASOK MPs said they would not support the plan. Analysts say that a consensus government could face many problems over political divisions and opposition leader Antonis Samaris still appears set on early elections.

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