European leaders meeting in Brussels on the second day of a crisis summit over Greece want an all-party consensus in Athens over how a new financial rescue should work with austerity plans, but skeptical analysts see little chance of such harmony prevailing in the fraught political scene in the union's eastern flank.

There was palpable relief in European capitals, in particular London, after European President Herman van Rompuy discounted the possibility of the EU invoking an existing mechanism that could bind unwilling members to any rescue and force them to cough up tens of millions of euros for Greece.

Germany has been rooting for the all-inclusive European Financial Stability Mechanism, dreaded by Britain and other non-eurozone EU members outside the purview of the current rescue negotiations. But the fear of the mechanism has also raised dire warnings it may cause not only the eurozone but also the EU to start falling apart.

Greece is widely faulted for not having done enough to make the most of the last rescue package and still is viewed with suspicion over its ability to make sensible use of new cash infusions.

The head of giant bond fund Pacific Investment Management Co., Mohamed El-Erian, told reporters this week Greece and other European economies would default on their debts to resolve their problems as the euro area deals with its debt crisis.

"For the next three years, we're going to see different economies work out different problems. For European economies, especially Greece, it would be through default," El-Erian, chief executive of PIMCO fund manager, told reporters in a video conference from Taipei. He didn't name countries other than Greece that he saw likely to default.

El-Erian's prediction ran counter to German-led EU negotiations to rescue Greece, and various EU assertions that there was no question of allowing Greece to opt for what could be the first sovereign default in the union.

El-Erian, a widely respected economist and past winner of the Business Book of the Year award, argues EU may be wasting money trying to prop up Greece.

El-Erian was dismissive of Greek performance since the first bailout last year. "Nothing has been done to enhance growth," he said. "No single (Greek) indicator has shown strength. They are afraid a restructuring would hurt European banks," said the French-Egyptian economist.

El-Erian said a Greek default would likely not trigger a global financial crisis because Greece was too small an economy.

PIMCO has headquarters in Newport Beach, Calif., and is the world's biggest bond fund, managing about $1.3 trillion.

It was not immediately clear in Brussels how soon a new EU package could be in place. Greece is widely expected to run out of cash in July. German Chancellor Angela Merkel hinted a new rescue plan could be decided this week. Officials said the total rescue amount is expected to exceed $170 billion.

Merkel said the EU would do everything to stabilize the euro but called on Greek politicians, including those from the opposition, to fulfill their "historic responsibilities."

In statements on the second day of talks the EU leaders called on all political parties in Greece to support the program's main objectives and warned that "national unity is a prerequisite for success." Greek opposition leaders have vowed to reject the package when it is put to a vote in the Greek Parliament.

earlier related report
China ready to purchase Hungary bonds, extend credit: Wen
Budapest (AFP) June 25, 2011 - China again confirmed its growing interest in Europe Saturday as Prime Minister Wen Jiabao announced Beijing would buy Hungarian government bonds and extend a billion euros in credit to the country.

The announcement came during his visit to Budapest, the first stage in Wen's second European tour in nine months.

At a press conference with Hungarian Prime Minister Viktor Orban after the two had held talks, Wen did not specify how much it would spend on Hungarian government bonds.

But he said the one-billion-euro ($1.4-billion) credit would be extended by the China Development Bank towards common projects.

China has in recent years invested heavily in Africa, Australia, Latin America and the United States.

More recently, Beijing has taken a closer interest in Europe which, as the continent battles a currency and sovereign debt crisis, has been welcome news for some countries.

Nine months ago, Wen made a first tour of Europe, travelling to Greece, Italy and Turkey and announcing investment in Greece and Poland -- though at least one major project with Poland, Chinese involvement in a public works deal, has since stalled over a funding dispute.

Hungary's Orban welcomed the bonds deal as "historic aid" from China.

The country's finances were now "guaranteed" at least in the medium term, even if the country could generate its own capital on the markets, he added.

He hailed the agreement as a "new and very important deal", which would include a dozen projects. Beijing, he added, had chosen Hungary as its new "logistics platform".

Projects included a collaboration between the Bank of China and Hungarian chemical group Borsodchem, and a new European distribution centre for Chinese technology firm Huawei.

China also wants to build a citric acid manufacturing plant in Szolnok, 100 kilometres (60 miles) east of Budapest, with a production capacity of 60,000 tons per year.

And Chinese company Canyi was looking to build a European production centre for lamps, although its location has yet to be decided.

China and Hungary also signed more general deals to develop transport, promote investment and create several cultural centres.

The Chinese leader also invited 150 Hungarian youths to visit China to further promote cultural ties.

In a speech Saturday, Wen called for greater cooperation with Central and Eastern Europe, China's official Xinhua agency reported.

"Currently, trade between us takes up less than 4 percent in our respective total foreign trade and less than 10 percent in China-EU trade," he said.

Noting that "much potential remains to be tapped" he called on both sides to open up their markets further to each other and to promote two-way investment.

Ahead of the visit, Hungary's Minister of National Development Tamas Fellegi had said Budapest hoped to become a "stepping stone" for China in Europe as a logistics and commercial distribution centre.

China, the world's second largest economy, has already started to rebalance its commercial and financial relations, today tilted toward the United States and Japan, more towards Europe.

Wen Jiabao's European tour continues on Sunday when he will travel to Britain, followed by a visit to Germany.

Wen was accompanied in Budapest by a large Chinese contingent that included 300 business delegates and a 110-strong press service.

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