European Union finance ministers pledged Tuesday to shore up cash-strapped banks and member states, as market concerns seemed to abate over the upcoming release of bank stress tests and fears of the euro debt crisis spreading to Italy and Spain, dpa reported. EU leaders are to attend a special eurozone summit on Friday, to add their weight to the efforts to turn the tide on the debt crisis, diplomats confirmed. The euro recovered to 1.39 dollars on Tuesday afternoon, from an earlier low of 1.38 dollars, after dropping below the 1.40 mark for the first time in four months. The Milan and Madrid stock exchanges recouped some of the heavy losses incurred on Monday. EU Economy Commissioner Olli Rehn warned during the Brussels talks that the eurozone debt crisis "poses a serious contagion threat to the European economic recovery." He later said Europe was suffering from "a severely intertwined combination of the sovereign debt crisis and banking sector fragilities. We cannot solve one without the other." Overnight, eurozone finance ministers signalled that they would expand the powers of their bailout fund in a bid to prevent the single currency's debt crisis from spreading to Italy and Spain. Options include lending Greece money to help it buy back some of its debt at reduced prices, thus lowering its debt burden. -- SPA
