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European Union finance ministers called for strong action to ensure stability before a meeting on Sunday to discuss ways of ring-fencing Greece's debt crisis to stop it spreading to countries like Portugal and Spain.European Union officials have been working out the details of a financial support mechanism that the finance ministers aim to set in motion before markets open on Monday."We are going to defend the euro... we have to give more stability to our guarantee," Spanish Economy Minister Elena Salgado told reporters before the Brussels talks.Ministers of France, Finland and other countries also stressed the need to defend the euro currency."I think it is important that we do everything we can to stabilise the markets, to show that we are coming through one of the difficult periods, and that we are prepared to do what is necessary to ensure that we have that stability," British finance minister Alistair Darling told reporters.Financial markets have been pounding euro zone countries with high deficits or debts as well as low economic growth, threatening to force Portugal, Spain and Ireland into a position where, like Greece, they would need to seek financial aid.An EU summit on Friday approved $110 billion euros ($147 billion) in emergency EU/IMF loans to Greece over three years to help it over a budget crisis in exchange for austerity measures so sharp that they have already caused violent protests.Economists estimate that if Portugal, Ireland and Spain eventually come to require similar three-year bailouts, the total cost could be some 500 billion euros.The leaders of the 16 countries that use the single currency said on Friday after talks with the European Central Bank and the executive European Commission that they would take whatever steps were needed to protect the stability of the euro area.They decided to ask all 27 EU countries to agree a financial mechanism to stop the Greek crisis spreading.MARKET TURMOILEuro zone leaders, who have been accused of heightening market uncertainty through lack of action, agreed last week to speed budget cuts and ensure deficit targets are met this year."The euro zone is going through the worst crisis since its creation," French President Nicolas Sarkozy said after Friday's euro zone summit in Brussels."The leaders have decided to put in place a European intervention mechanism to preserve the stability of the euro zone. The decisions taken will have immediate application, from the point that financial markets open on Monday morning."Fears that a euro zone debt crisis could rock banks and the global economy like the September 2008 collapse of U.S. bank Lehman Brothers swept through markets last week, pushing global stocks to around a three-month low.Euro zone sources said late on Friday that the new EU mechanism to stabilise markets could be funded by bonds issued by the European Commission with guarantees from euro zone states.No details have been disclosed so far, but the sources said EU law provided a legal basis for such a mechanism.The treaty governing the EU says that if a member of the 27-nation bloc is in difficulties caused by circumstances beyond its control, EU ministers may grant it financial assistance."Two mechanisms have been agreed -- one based on article 122.2 of the Treaty saying the council can help a member state with serious difficulties," one of the sources said."The other will enable the European Commission to go on the markets and get money with an explicit guarantee of the member states and an implicit guarantee of the ECB (European Central Bank," the source added.A second source said: "The details of this mechanism will be agreed by Sunday and the idea is to trigger both on Sunday."(Writing by Charles Dick)
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