Obama reads riot act to European leaders in late night phone calls and orders them to take more dramatic action on debt crisis



U.S. Treasury Secretary: 'The crisis in Europe remains the central challenge to global growth'

Obama embarks on eight day Asia-Pacific tour to 'hitch' U.S. economy to growth opportunities



Late night calls: Barack Obama made contact with several European leaders to demand faster action

Barack Obama has read the riot act to the leaders of several European countries - saying more dramatic action is needed to avert a eurozone meltdown.

The U.S. President made telephone calls to German Chancellor Angela Merkel, French President Nicolas Sarkozy and Italian President Giorgio Napolitano late last night.

Treasury Secretary Timothy Geithner said the president had demanded faster action from Europe.

It came as Hong Kong revealed it had plunged into recession.



Speaking from the Asia-Pacific Economic Co-operation conference, Geithner said: 'The crisis in Europe remains the central challenge to global growth.

'It is crucial that Europe move quickly to put in place a strong plan to restore financial stability.'

He said all of the 21 APEC countries were directly affected by the Eurozone crisis, and encouraged them to take steps to 'strengthen growth in the face of these pressures from Europe'.

And he revealed that Obama was looking to hitch the U.S. economy to growth opportunities in Asia, where he is embarking on an eight day tour, that he hoped would help power the recovery he needs for re-election.

Developments in Europe saw U.S. stocks rise yesterday. The Dow Jones Industrial Average finished up 1 per cent at 11893.79, and the Nasdaq Composite tacked on 0.1 per cent to 2625.13.

The warning to Europe comes as Italy's Senate today votes, after months of dithering and delay, on austerity measures demanded by the EU.

The Italian upper house is due to vote on a package of cuts. The law should pass easily, as it should in the lower house on Saturday.

Midnight chat: German chancellor Angela Merkel (left) and French President Nicolas Sarkozy (right) received calls from the U.S. President last night



Voting for the first time in the upper house will be Mario Monti, the former European Commissioner who has emerged as favourite to replace Silvio Berlusconi as prime minister.

EUROPEAN CRISIS: AT A GLANCE Greece: Appointed Lucas Papademos as new Prime Minister, who hopes to secure 130bn euro debt deal from the eurozone to keep the country in the single currency.

Italy: PM Silvio Berlusconi has promised to quit once economic reforms have been passed, possibly as early on Sunday. Likely to be replaced by former European Commissioner Mario Monti. Fears Italy would have to be bailed out after interest on its 10-year bonds rose past critical 7 per cent figure which saw Ireland, Portugal and Greece default. Resignation of Berlusconi has calmed the waters, and yields are now down to 6.8 per cent.

Britain: Government making contingency plans for if the euro collapses. Worried that it will drag the UK into a double-dip recession.

Berlusconi, who lost his majority in a vote on Tuesday, has promised to resign after the financial stability law is passed by both houses of parliament.

If the votes pass smoothly, Napolitano may accept Berlusconi's resignation as early as Saturday night and formally mandate Monti to try to form a new government soon afterwards.

At first, Berlusconi had insisted that early elections were the only option. But he has since softened his stand and is said by sources to be open to a new government.

Markets were calmed at the prospect of an interim government, rather than a three-month vacuum before elections are held.

Monti, a highly respected international figure, has been pushed for weeks as the most suitable figure to lead a national unity government to push through painful austerity measures.

It also comes as Greece's prime minister designate was set to name a new crisis cabinet today to calm the political turmoil that has threatened to bankrupt the country and force it out of the euro zone.

Greece's two main parties agreed yesterday to make Lucas Papademos head of a new unity government.

It ended a chaotic search for a leader to save the country from default. He must now fulfill the terms of a 130 billion euro bailout plan agreed with European partners in October.

Papademos said: 'The path will not be easy but I am convinced the problems will be resolved faster and at a smaller cost if there is unity, understanding and prudence.'

Sources in the two parties - the ruling Socialists and the opposition New Democracy - said Evangelos Venizelos was likely to remain as finance minister when President Karolos Papoulias swears in the new cabinet, scheduled for 12noon GMT.

The weak global economy has today pushed Hong Kong into a recession with GDP figures showing a third-quarter contraction, the second straight quarterly decline.



The Hong Kong government said exports dropped off sharply towards the end of the quarter 'amid an increasingly austere global economic environment'.



The economy grew 4.3 per cent in the third quarter, smaller than the revised 5.1 per cent growth in the second quarter, which was itself less than the 7.5 per cent expansion notched up in the first quarter.



Some economists define a recession as two straight quarters of economic contraction while others say it is a significant decline in across-the-board economic activity lasting more than a year.



