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Analysis: EU support for Greece was inevitable

Greece's floundering left eurozone leaders with no choice but to step in.

Germany's Chancellor Angela Merkel, Greece's Prime Minister George Papandreou, France's President Nicolas Sarkozy and European Council President Herman van Rompuy leave the EU Council building after a meeting before an informal summit of European Union heads of state and government in Brussels Feb. 11, 2010. (Yves Herman/Reuters)

BRUSSELS, Belgium — No Delphic Oracle was needed to predict that European Union leaders would, eventually, rally to support Greece's floundering public finances.

From the moment back in October when revelations that the country's finances were in a much greater mess than the official figures showed, it was clear that if the Greek government could not calm the market storm that broke over the country, Europe's big economic hitters would have to step in.

The prospect that a member of the euro currency bloc, or eurozone, might default on its debts and the danger that an escalating Greek crisis would spread to Spain, Portugal and even Italy, could call into question the credibility of the euro itself. That was too big a risk for Europe's leaders to take.

So after successive commitments to austerity measures from Greek Prime Minister George Papandreou failed to stop the market rot, Germany, France and the others had little choice but to produce today's promise of "determined and coordinated action, if needed," to rescue the eurozone's weakest link.

Europe's leaders did not give details of the form a rescue plan might take or even hint at how much money they would be prepared to advance for the Greeks, but they insisted that the unprecedented political message was clear.

"Greece is part of the eurozone. Greece is part of Europe. We will support Greece," French President Nicolas Sarkozy told a press conference. "Everybody should understand what we mean, it's clear, it's unambiguous."

(Read more on Greek unrest in reaction to the government's proposed budget cuts and Papandreou's drive to increase government transparency.)

The deal means that if pressure mounts on Greece to the extent that Athens is faced with a default on its sovereign debt, Germany, France and other eurozone nations will reach for their wallets. They didn't specify details, but likely options include direct loans or state-owned banks buying up Greek bonds.

"The modalities will have to be worked out depending on events," Sarkozy said.

Papandreou has not yet asked for a rescue and the eurozone remains hopeful that a bailout won't be necessary. It hopes today's summit statement sends a clear message to the markets that Greece's partners won't let the country go under.

Markets reacted cautiously. Bond spreads reflecting how much Greece has to pay to borrow narrowed on the news then widened, reflecting jitters at the lack of details from the European leaders. The euro also rose and then fell in the hours after the announcement.