Greece welcomes Obama support on speculators

Greece has blamed market speculators for worsening its current economic troubles.

European politicians have already expressed their concern over the issue.

"We ourselves were in the last few months the victims of speculators," Mr Papandreou said, after meeting Mr Obama.

"Obama assured me that he considers the initiative useful, important, positive, and that the United States will contribute in this direction."

Betting on failure

US support follows German Chancellor Angela Merkel's call for "quick action" to tackle the problem of speculation, while European Union President Jose Manuel Barroso also spoke out.

They say speculators, such as hedge funds, are unfairly betting that Greece will default on its loans.

Such moves are making it more expensive for Greece to borrow funds.

The speculators are typically betting against Greece defaulting on its government bond payments - or having its credit rating lowered - by buying large quantities of a complex financial insurance instrument called a Credit Default Swap (CDS).

The way this works is that if Greece defaults on paying interest on its bonds, or has its credit rating lowered, then the owners of CDSs linked to the bonds will be eligible for penalty payments from the bond holders - typically banks.

The knock-on effect is that Greece is having to offer higher interest on its bonds to still make them attractive for banks to buy.

Mr Barroso told the European Parliament on Tuesday that the EU would look at banning "purely speculative" sales on credit default swaps of sovereign debt.

French President Nicolas Sarkozy has also called for new rules against financial speculators.