Bank stress tests will not assume Greek default: EU watchdog

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The EU banking regulator said Thursday that it is closely following the eurozone debt crisis but added that its stress tests on the financial sector will not assume a potential default by Greece.

"The European Banking Authority is closely monitoring the situation and the difficult financing circumstances in Greece," the London-based EBA said in a statement.

"The stress test results will allow an assessment of potential systemic impacts stemming from the current market conditions on sovereign risk and banks' cost of funding."

The EBA added that "no default is assumed" in the tests, which are designed to examine the banking sector's ability to weather another global financial crisis.

European leaders open a pivotal summit Thursday facing increasing pressure for a breakthrough on Greece amid fears its debt crisis will wreak havoc across Europe and beyond.

The tension mounted further on the 27 EU leaders to act when Greek unions announced a general strike next week timed to coincide with a crucial parliamentary vote on massive new spending cuts. Greece could default should Prime Minister George Papandreou lose the vote.

© 2011 AFP

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