European leaders seek calm on Greece

German Chancellor Angela Merkel and French President Nicolas Sarkozy also stressed to Greek Prime Minister George Papandreou “that it is more indispensable than ever to fully implement the decisions adopted July 21’’ by the eurozone leaders “to ensure the stability of the eurozone,’’ the French president’s office said in a statement.

Fears that Greece was heading rapidly towards a chaotic default - and the idea that it should potentially leave the euro and return to its own currency - have roiled markets for days, both across the 17-nation eurozone and globally.

The main fear of a Greek bankruptcy is that it could destabilize other financially troubled European countries such as Portugal, Ireland, Spain, or Italy. It would also have a knock-on effect on banks, many of which are large holders of Greek government bonds. Moody’s yesterday downgraded the credit ratings of two French banks, Societe Generale and Credit Agricole.

Merkel and Sarkozy pressed the Greek leader on the “importance they attach to the strict and effective implementation of the Greek economic redressment program,’’ statements issued in Paris and Berlin said.

Sarkozy’s office said Papandreou “confirmed his absolute determination to take all measures necessary to implement the ensemble of commitments made.’’ The Greek reforms “are indispensable for the Greek economy to find the path of sustainable and balanced growth.’’

The euro ticked up by a less than penny to $1.37 on news of the completion of the talks.

Greece currently relies on funds from last year’s $150 billion international bailout to service its debt and pay salaries and pensions. But the lifeline could be cut if the country continues to miss fiscal and reform targets.