Germany and France agree on joint position to save Greece

Spanish and Greek bonds rose after German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed on a joint position to solve Greece's debt crisis.

 German bunds pared their declines after Luxembourg Prime Minister Jean-Claude Juncker said a "selective default" is a possibility for Greece. Details of the Franco-German agreement will be released today when European leaders meet in Brussels, Merkel and Sarkozy said in a statement after seven hours of talks in Berlin. German Deputy Foreign Minister Werner Hoyer said Germany may back common euro bonds in the future as legal rules bar such a move for now. Spain's 10-year borrowing costs approached 6 percent at a bond sale today, says Bloomberg.

European leaders have come under criticism for slow, piecemeal efforts to stem debt crises in several countries that use the euro.

The IMF released a report Wednesday urging European leaders to act more boldly to keep debt troubles from hurting the strongest members of the eurozone and stifling growth across the continent.

There is "no consistent roadmap ahead," it warned, saying that could produce "possible significant regional and global spillovers.", reports BusinessWeek.

One element attracting consensus is the need to reduce the burden on indebted nations, not only by buying back Greek bonds but also through a reduction in the interest rates offered to Greece, Ireland and Portugal, which have also accepted international help. The maturities of these loans would also be extended.

As part of the Greek package, Ireland and Portugal - the other two euro countries that have received international bailouts - will receive new, similarly favorable financing conditions on their official loans, the second official said, meaning that they would have to pay the E.F.S.F.'s borrowing rate plus some costs, which are all expected to come in around 3.5 percent.

Ireland will not be required to raise its relatively low corporate tax rate, currently 12.5 percent, as some countries, such as France, had sought, the official said, according to New York Times.