EU's Rehn warns Greek collapse could be like Lehman

HELSINKI (Reuters) - The insolvency of Greece could paralyze the world’s financial system and cause a global recession, as the bankruptcy of Lehman Brothers bank did in 2008, the European Union’s monetary affairs commissioner said.

Olli Rehn made his warning in a column published on Friday in Finnish weekly magazine Suomen Kuvalehti, before a meeting of euro zone leaders to seal a 110 billion euro ($147.6 billion) package of emergency loans for debt-stricken Greece.

“Little did authorities of the United Stated know in September 2008 what the bankruptcy of investment bank Lehman Brothers would lead to,” Rehn said.

“The consequence was that the world’s financial system was paralyzed in a way that led to the biggest global recession since the 1930s.”

“Consequences from Greece’s insolvency would be similar if not worse,” he added.

The euro zone heads of state and government were due to hold an informal meeting in Brussels at 1700 GMT.

Apart from rubber-stamping the aid for Greece, following a decision last Sunday by euro zone finance ministers, the leaders also faced the challenge of ringfencing the Greek debt-crisis so that it does not spill over to other euro zone countries with large deficits or debt and low growth.

They were also expected to discuss ways of strengthening the economic cooperation of the 16-country single currency area to prevent such crises in the future.

Reporting by Terhi Kinnunen, writing by Jan Strupczewski, editing by Susan Fenton