Tensions caused by the Greek debt crisis appear to be easing following assurances Thursday by European officials that an agreement on aid for Greece will be reached in a matter of days. Global markets have been in turmoil as the debt crisis threatened to spread to other countries. But consensus that the relief package will be larger than originally expected is helping to shore up confidence in the euro, which has fallen precipitously in recent days.
In a move aimed at reassuring financial markets, European officials announced that Greece is unlikely to default on its loans, following progress on a bailout plan.
EU Monetary Affairs Commissioner Olli Rehn said negotiations include demands that Greece to reduce its massive debt.
"I want to underline that this exercise has been done not only for Greece, but for every euro member state and their citizens to safeguard the financial stability in Europe and globally," said Olli Rehn.
Prospects of an imminent deal fueled a sharp rebound on the Athens Stock Exchange and helped the 16-nation euro climb out of a one year low against the U.S. dollar.
Greece must pay 8.5 billion euros in bonds by May 19.
But worries that a key election in Germany could delay aid for Greece helped stoke market fears.
Analyst Nicholaos Skourias says worries intensified this week after Standard and Poor's downgraded ratings for bonds issued by Greece, Portugal and Spain.
"There is this fear of contagion," said Nicholaos Skourias. "I think that Greece and Portugal are very small countries but the crisis could spread to Spain which is a more important player in Europe."
Analysts say fears of a larger debt crisis helped to speed up negotiations.
But in Greece, many are angry that tougher austerity measures will hurt workers and retired pensioners.
Yiannis Panagopoulos is head of Greece's largest workers union:
"The lenders not only pressure, but blackmail and don't accept negotiations," said Yiannis Panagopoulos. "We got the flavor of a very harsh package of measures, measures that are against development, new measures that will lead to recession."
The U.S. has not been immune to the crisis. Key stock indexes fell sharply on Wall Street after the credit downgrades.
On Thursday, Democratic Congressman Paul Kanjorski used the Greek crisis to stress the need for U.S. financial reform.
"Some recent news reports suggest that bankers crafted derivatives to hide Greek debt," said Paul Kanjorski. "Congress must respond by creating more transparency in our derivative markets as provided for in the house-passed bill."
Earlier this week, the International Monetary Fund agreed to triple the size of its aid package to Greece.
Analysts say the move appears to have calmed global worries of a larger crisis, at least for the time being.