Brave EU decisions needed to calm down markets (Update)

Prime Minister George Papandreou said on Friday that European Union leaders need to take brave decisions during a summit on the euro zone debt crisis later this month for markets to calm down.

“Only a coordinated policy can calm the markets,? Papandreou told members of his party.

“If our decisions in the EU are not brave and effective, markets will react very quickly and we will find ourselves at the negotiating table again.”

Euro zone leaders will meet on March 11 to hammer out a comprehensive package of measures against the bloc’s debt crisis, before EU leaders sign off on the deal at a meeting in Brussels on March 24/25.

Papandreou added that the European Union needed to become more competitive and that it faced a dilemma in which model it should adopt.

?Decisions over the next few weeks will be decisive for the EU,? he said. ?There is no room for complacency or delays.?

Papandreou said competitiveness should be based on a model that invests in ?people, education, innovation and infrastructure.? He said earlier that wage cuts wouldn?t necessarily usher in competitiveness.

With uncertainty over Greece?s debt future growing, the country?s two-year government notes fell, with the yield surging 14 basis points to 15.05 percent on Friday, after rising to 15.07 percent, the highest since May 10.

Meanwhile, Spanish Finance Minister Elena Salgado said that her country favors giving Greece ?more flexibility? on rescue loans.

Spain supports considering ?different formulas? for the Greek loan to ease the interest-rate burden as the country steps up austerity measures, Salgado told Bloomberg.

Terms should be ?re-examined? as they?re ?the same when the country is bearing the impact of the austerity measures as when those measures will be easing? in two or three years.

Her comments follow German Chancellor Angela Merkel?s increased resistance to cutting rates on bailout loans while European leaders are still seeking to reach a consensus on boosting the firepower of the region?s 440 billion-euro rescue fund.

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