The FTSE 100 has rallied this morning (2

The FTSE 100 has rallied this morning (27 Sept 2011) as a plan to shore up the Eurozone edges ever closer.

Talks are being held between German Chancellor Angela Merkel and Greek Prime Minister George Papandreou today, to discuss Greece’s progress with austerity measures and reducing the country’s deficit.

The talks come ahead of a meeting in Athens between the European Commission, European Central Bank, and International Monetary Fund (IMF), which are the next phase in establishing a plan to protect the Eurozone, and tackle Greece’s debts.

In a plea to German businesses, Papandreou called on them to take advantage of the crisis to ‘unite Europe, to make a stronger Europe’, he encouraged investment, claiming that the future of the country will be profitable.

Greece is at the pinnacle of the Eurozone crisis, and while talks held over the weekend between the ‘Troika’ – the European Commission, European Central Bank, and International Monetary Fund (IMF), were inconclusive, reports of possible rescue plans have emerged and buoyed markets.

Plans that are reported to have been discussed include, the recapitalising of banks, to enhance the bailout fund (from €300 billion to €2000 billion), and a further default of Greece – potentially allowing 50 per cent of its debts to be relieved.

Favoured by economists seems to be the plan for an orderly default for Greece, keeping it in the Eurozone. What emerges will depend on a number of factors, including whether Greece has done enough to try and reduce its debts.

Commenting on the reported proposals, Ted Scott at F&C said: “The proposed rescue plan represents another leap forward by the policy makers if it can be agreed, and that remains a big ‘if’. It includes measures that would have been deemed unthinkable even a few months ago and illustrates that collectively the authorities have become more flexible in response to extreme circumstances and pressure. Nevertheless, what is suggested does not represent a fundamental change in strategy that can achieve a sustainable and long lasting solution to the sovereign debt crisis and it raises as many questions as it answers. While a Greek default within the confines of the Eurozone now appears even more likely, the plan to build a firewall will not succeed until the one of 2 scenarios becomes apparent: a break-up of the EMU or an embrace of full fiscal union.”

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