Governments around the world sought on Friday to calm financial markets hit by fears that Greece's debt crisis could cause turmoil in other European economies.

Group of Seven finance ministers discussed the debt problems in a conference call after U.S. Federal Reserve officials expressed concern and President Barack Obama told German Chancellor Angela Merkel by telephone he backed efforts to rescue Greece.

World stocks held near a three-month low, despite strong U.S. jobs data, because of fears that emergency loans from the European Union and International Monetary Fund might not be sufficient to prevent a Greek default.

We agreed on the importance of a strong policy response by the affected countries and a strong financial response from the international community, Obama said.

He said regulatory agencies were investigating a sudden drop on U.S. markets on Thursday, which he called unusual market activity, and would recommend appropriate action.

Obama and Merkel spoke before a summit in Brussels at which euro zone leaders said they would put their political stamp of approval on the EU-IMF deal to release 110 billion euros over three years to help Greece overcome its debt and budget crisis.

Merkel said the leaders would also discuss accelerating moves on tightening financial regulation to prevent such crises in the future, and all 16 countries that use the euro must abide by rules on targets such as for national debt and deficits.

First, we must speed up the regulation of the financial markets. Time is running out, this has to happen quickly, she told reporters in Brussels.

Merkel, who presides over Europe's largest economy, said she would not rule out reform of treaties to ensure budget rules are toughened. Other EU leaders have resisted such changes and the 27-country bloc has struggled for unity during the crisis.

GERMAN PARLIAMENT APPROVES LOAN

Merkel spoke after the German parliament approved its share of the Greek rescue, the largest contribution by any of the euro zone countries. The Dutch parliament also approved its part of the deal and Italy's cabinet has given initial approval.

But in a potential obstacle, five German academics filed a legal challenge to the package, reflecting widespread German public opposition to the measure.

Philadelphia Federal Reserve Bank President Charles Plosser said the crisis did not pose a huge risk to the United States, but this did not mean it could not evolve into one.

The challenges that Greece pose are at the moment primarily for Europe more broadly ... that can spill over to us in the form of a weaker market for our exports, he said after giving a speech in Delaware.

The more direct danger is of course concerns about the financial markets and how they will behave.

Merkel referred to a battle between governments and markets, and EU monetary affairs chief Olli Rehn compared Greek insolvency to the financial crisis 18 months ago.

French Prime Minister Francois Fillon said the action to save Greece would defeat and put an end to speculation which has been unleashed against this country, and there was no reason for markets to take aim at indebted Spain and Portugal.

Dismissing suggestions the euro zone was about to break up, European Central Bank Governing Council member Guy Quaden told a Belgian newspaper: Portugal, Spain, Ireland or Italy are not in the same situation as Greece.

Euribor bank-to-bank lending rates had earlier reached their highest level in almost four months and the euro traded close to a one-year trough.

The market volatility could prompt China to move more slowly than expected to let its yuan currency appreciate, foreign exchange strategists said.

PROTESTS OVER GREEK AUSTERITY PLAN

Greece's parliament backed an austerity plan on Thursday but selling accelerated across markets after the ECB said it had not considered buying government bonds to ease Greece's debt crisis. Some investors hoped it would be more active in calming markets.

European investment-grade corporate credit default swaps hit their widest levels in more than a year, and there was a rise in the premium that investors demand to buy peripheral euro government bonds rather those issued by Germany.

The panic trading that started today again is fading slightly but things remain quite vulnerable, said Patrick Jacq, euro zone interest rate strategist at BNP Paribas.

Greece's 30 billion euro ($40 billion) austerity bill imposes years of hard measures in return for the joint rescue by the EU and IMF, and has led to violent protests in Athens.

Greek Prime Minister George Papandreou sought to ease any concern over his country's commitment to the austerity measures when he arrived for the euro zone meeting in Brussels.

The Greek people have endured the strain of the economic crisis during the last few months, yet both the government and the Greek people are absolutely determined to change the path for Greece to one of stability and growth, he said.

But RBS economist Silvio Beruzzo said: If it turns out that the economy is not able to withstand the measures, if growth falls much more than forecast there could be social unrest, forcing the government to consider alternative moves in its asset-liability management... This may include restructuring.

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(Additional reporting by Noah Barkin in Athens, Gernot Heller in Berlin, Ilona Wissenbach, Philip Blenkinsop and John O'Donnell in Brussels, George Matlock in London, Pedro Nicolaci da Costa in Richmond, Virginia; writing by Andrew Roche and Timothy Heritage; editing by David Stamp)