Trichet urges support for Greece to end contagion risk

The euro zone must come up with a support package for Greece that curbs the threat of problems spreading to other countries in the bloc, European Central Bank President Jean-Claude Trichet said on Thursday.

Intense market pressure and soaring debt costs forced Greece to trigger a request for an aid package late last week. Fears of a spillover to other fiscally stretched euro zone states have escalated in recent days following rating agency downgrades to Portuguese and Spanish sovereign debt.

Trichet said the euro zone needed to take firm action now to prevent the problems spiralling.

"What we need most at this time is a strong sense of direction … that can guide us on how we can emerge from these turbulent events," Trichet said in a speech at the Munich Economic Summit.

He called for support that "will avoid the materialisation of financial risks for the euro area as a whole."

Trichet declined to comment on current talks in Athens between Greece, the European Commission, the International Monetary Fund and the ECB, but said he was confident as to their outcome.

He has said he expects the talks to be concluded in coming days.

Investors are closely watching for details on whether the aid will start in time for Greece to refinance an 8.5 billion euro bond coming due on May 19, and if the deal will be big enough to tackle Athens' 300 billion euro debt pile.

On Wednesday, Germany's Green party parliamentary leader cited IMF chief Dominique Strauss-Kahn as saying the aid package would be worth 100-120 billion euros ($133-160 billion) over three years, with 45 billion euros expected in the first year.

Trichet said the financial crisis was continuing to "profoundly" challenge Europe's economy, and urged a revamp of Europe's fiscal rules and more intense surveillance of governments' finances.

"The weak points of past multilateral surveillance will be corrected, and the Stability and Growth Pact will be reinforced and rigorously applied in its letter and in its spirit," Trichet said.