Greece, Europe struggle to contain debt crisis

BERLIN (AP) - German Chancellor Angela Merkel sought Tuesday to calm market fears that Greece is heading for a chaotic default as Europe struggles to contain a crippling financial crisis.

Merkel rejected the notion that a Greek bankruptcy - a possibility raised a day earlier by her deputy that spooked markets - would provide a quick solution to the eurozone debt crisis.

She argued that Europe instead needs to stick to its efforts to cut budget deficits and improve its competitiveness, and that resolving the crisis would be "a very long, step-by-step process."

Her comments came ahead of a teleconference Wednesday with French President Nicolas Sarkozy and Greek Prime Minister George Papandreou.

Fears of an imminent Greek default pushed interest rates on the country's 10-year government bonds up Tuesday to a new record of over 24 percent, although Merkel sounded optimistic regarding Greece's chances of getting the next batch of bailout cash from the so-called troika - the European Commission, the European Central Bank and the International Monetary Fund.

Representatives from the three organizations are due back in Athens soon.

"Everything that I hear from Greece is that the Greek government has hopefully understood the signs of the time and is now doing the things that are on the daily agenda," Merkel told rbb-Inforadio. "The fact that the troika is returning means that Greece has started doing some things that need to be done."

Meanwhile, President Barack Obama urged European leaders to take a more forceful approach to the continent's debt problems, which could slow an already-faltering U.S. economy.