LONDON (Reuters) - Alarm is growing in the United States at Europe’s inability to solve its debt crisis and talk of a full-on Greek default is on the rise. Following are the key events and developments on Tuesday.
* German Chancellor Angela Merkel and French President Nicolas Sarkozy will make a statement on Greece later on Tuesday. “They are going to take action today,” a senior French government source told Reuters. Announcement pushes the euro higher, it then falls as Sarkozy’s office denies any joint statement is planned.
* Earlier, Merkel said Europe was doing everything in its power to prevent Greece from defaulting on its debt and cautioned that an exit from the euro zone would unleash “domino effects” and should be avoided at all costs. Other sources in Germany say Greek default is now highly likely and Austrian Economy Minister Reinhold Mitterlehner said all possible scenarios that could solve Greece’s debt woes must be considered.
* U.S. President Barack Obama demands decisive action from euro zone leaders, saying Greece is the immediate concern but the biggest fear is that Spain and Italy succumb.
* Following a G7 policymakers’ meeting which agreed little, U.S. Treasury Secretary Timothy Geithner is due to make an unprecedented one-day trip to Poland this week to meet with euro zone finance ministers as fears grow that Greece will soon default on its debt.
* Italian officials met Chinese counterparts last week. Reports say they asked Beijing to buy Italy’s bonds. Analysts are skeptical. Similar talk has swirled before with reference to the bonds of Greece, Portugal and Spain with little end result.
* Yields soar at Italy bond auction to highest level paid for a new five-year bond since the euro currency’s launch, putting pressure on the European Central Bank to keep buying Italian debt in significant size.
* Italy’s Berlusconi says parliament will pass austerity measures on Wednesday.
* Shares in BNP Paribas and Societe Generale, France’s two largest listed banks drop sharply, on concerns about their liquidity and access to short-term funding.
Writing by Mike Peacock