European Central Bank President Jean-Claude Trichet is cutting short a trip to Australia to attend a special EU summit, prompting market speculation initiatives are in the works to help resolve Greece’s debt problems.

EU heads of state are due to meet this week in Brussels for a special summit on the economy under pressure to restore confidence among investors worried that rising debt in Greece, Portugal and other weaker states in the Eurozone could undermine a global recovery.

The summit was called in early January and Trichet had been expected to spend both Tuesday and Wednesday in Australia at central bank meetings. Instead, he is leaving early, officials at the Reserve Bank of Australia and the ECB said.

He will fly on Tuesday to make sure he returns in time for the main session of the European summit, prompting speculation over the meaning of his early departure.

“There is a possibility that the EU could get the ECB involved and support Greece,” said Ayako Sera, market strategist at Sumitomo Trust Bank. “Fiscal concerns that have also spread to Spain and Portugal could temporarily ease if we get something on Greece.”

The euro inched up on news of Trichet’s changed travel plans as dealers speculated about European support for Greece.

“Investors may begin to think that a policy measure directed at Greece’s fiscal situation is potentially in the works,” said Barclays Capital in a research note.

It has fallen more than six percent since mid-December when ratings agencies first downgraded Greece.

Investors have shifted funds out of riskier assets into so-called safe havens, including the Japanese yen and the Swiss franc. Yields on Greek, Portuguese and Spanish debt and the cost of insuring against default have risen sharply.

Summits
The EU usually holds four summits a year, when all 27 heads of state or government gather in Brussels. The first summit, scheduled for March, normally focuses on economic issues.

But EU President Herman Van Rompuy, who can convene a special summit at any time if there are pressing issues, called for the meeting saying the bloc needed more economic growth in order to finance its social model on a sound basis.

Trichet has regularly taken part in the main session’s of the summit, but doesn’t always attend.

Before his departure, Trichet told the central bank gathering it was important to monitor global developments, not just local ones, and to anchor inflationary expectations.

“Keeping inflation expectations anchored remains of paramount importance, under exceptional circumstances even more than in normal times. Our framework has been successful in this regard thus far,” Trichet said. “But the lessons of the past fifty years – and, in particular, our success in anchoring inflation expectations – should remain uppermost in our minds.”

Eurozone finance ministers, facing the bloc’s first debt crisis in the 11-year-old currency union, tried to calm investor fears over the risk of sovereign default in peripheral states at a Group of Seven meeting in Canada over the weekend.

They said they would ensure Greece kept to a plan to cut its budget deficit to below three percent by 2012 from 12.7 percent in 2009, the Eurozone’s biggest gap.

Market sentiment
Trichet, who attended the G7 meeting, expressed confidence in the Greek plan. But the G7 comments did little to lift investor appetite for risk.

“Sentiment is still weak amid deepening concerns about southern European nations’ sovereign rating risks,” said Juhn Jong-kyu, a market analyst at Samsung Securities in Seoul.

Governments in Athens, Lisbon and Madrid are pushing through budget cuts to tighten their fiscal belts and restore confidence in their economies and ability to service their debt.

But they face domestic opposition to the plans.

Greek civil servants recently threatened to stage more strikes in protest at the austerity measures, raising worries over the government’s ability to rein in its deficit that has been swollen by the global crisis and billions of euros in stimulus spending.

A failure to press ahead with austerity measures is likely to increase pressure on the three state’s bonds and push up borrowing costs in a vicious circle that economists say could force the bloc to bail out one of its members or even prompt a country to be expelled from the EU.