European Union vows to avert Greek default

BRUSSELS: European Union leaders vowed to stave off a Greek default as long as Prime Minister George Papandreou pushes through a package of budget cuts next week, pledging to do whatever it takes to stabilise the euro economy.

"We have agreed that there will be a new program for Greece," German Chancellor Angela Merkel told reporters at an EU summit in Brussels on Sunday. "This is an important decision that says once again we will do everything to stabilise the euro overall."

Greece's next hurdle is to shepherd 78 billion euros ($111 billion) of austerity measures through parliament, after Saturday's endorsement of the program by experts from the European Commission, the European Central Bank and the International Monetary Fund.

Europe's latest attempt to stem the debt crisis came after bonds of debt-strapped euro nations slumped and officials in the US and China warned that the euro area's failure to restore confidence threatened the world economy.

Greece's Papandreou called the commitment to a new three-year aid program "not only a green light but also a positive sign for the future of Greece."

The summit ended on Sunday with leaders endorsing Italy's Mario Draghi as the next president of the ECB after a last-minute dispute threatened to overshadow the efforts on Greece. French President Nicolas Sarkozy held up the confirmation of Draghi, 63, until another Italian on the ECB's board, Lorenzo Bini Smaghi, offered to step down to make way for a Frenchman.

Bini Smaghi promised to move to a "new job" by the end of the year, Sarkozy said in Brussels. Draghi is slated to take over the ECB helm from Jean-Claude Trichet on November 1.

Saturday's discussions were dominated by Greece, which is drawing on 110-billion loans pledged last year.