EU's Barroso to tell EU leaders debt crisis now systemic

BRUSSELS, Dec 16 (Reuters) - The euro zone sovereign debt crisis has become systemic and requires steps for the whole euro zone and specific ones for member states, European Commission President Jose Manuel Barroso will tell EU leaders on Thursday.

Barroso’s speaking notes prepared for the summit, obtained by Reuters, show the head of the EU executive believes one of the reasons for the crisis is that markets were mispricing euro zone risk and acting as a herd.

“The current sovereign crisis has now become systemic in nature, and is driven not only by budgetary fundamentals, but also by the mispricing of credit risk by investors and short-term herding behaviour in the markets,” the notes say.

EU leaders will discuss limited treaty change on Thursday and Friday to pave the way for the creation of a European Stability Mechansim to resolve debt crisis from mid-2013.

Reporting by Jan Strupczewski, editing by Luke Baker