Greece courts Sarkozy after German bail-out win

30th September 2011, Comments 0 comments

Greece's Prime Minister Georges Papandreou was to bring his campaign to save his economy to Paris on Friday as nervous markets turned their attention to a key international audit of Greek finances.

The Greek premier was due to hold talks with France's President Nicolas Sarkozy, one day after German lawmakers gave the faltering eurozone vital breathing space by agreeing to boost the bloc's bailout fund.

France will be one of the key contributors to the expanded fund while its own banks are critically exposed to sovereign debt from Greece and other weak links in the eurozone chain -- Italy, Spain and Portugal.

Meanwhile, in Athens, auditors from the European Union, European Central Bank and International Monetary Fund are conducting an audit to decide whether to disburse eight billion euros ($11 billion) of crucial aid for Greece.

While some eurozone members have yet to approve the expansion of the broader bail-out fund, Greece is waiting on this tranche of a first bailout accord in May 2010 to pay its bills next month and so avoid default.

Payments depend on whether the EU-ECB-IMF troika of creditors, who got to work on Thursday studying Greek government accounts, agree that Papandreou's harsh austerity plans go far enough to clean up Greece's books.

The audit is open-ended but the experts are expected to report before G20 finance ministers meet in Paris on October 14 and 15. France holds the G20 rotating presidency and will want a plan in place to reassure the markets.

The Greek leader appeared in Berlin this week to plead that his government and his people had made a "superhuman effort" and he comes to Paris to seek to persuade Sarkozy to support his cause.

Papandreou was in Poland en route to Paris and met EU president Herman van Rompuy to discuss the build up to a second crucial mid-month meeting -- the October 18 eurozone summit in Brussels, officials said.

France's concern is not just to maintain the stability of the eurozone but also to protect its own banks, which are seen as overexposed to risky debt from Mediterranean countries and short of liquidity.

"After the meeting with Mr Papandreou I will have the opportunity ... to say exactly what our strategy is in terms of the support that we owe to a European country like Greece," Sarkozy said in a statement.

European stock markets -- and French banking shares in particular -- have been extremely volatile in recent weeks, riding a roller-coaster of rumour about liquidity crunches, possible defaults and new rescue plans.

They climbed strongly after the German vote to back the expansion of the European Financial Stability Facility but fell back Friday following bad inflation data from the eurozone economies.

Eurozone inflation soared to 3.0 percent in September, up from 2.5 percent in August, according to figures announced Friday, just days before European Central Bank chief Jean-Claude Trichet chairs his last policy meeting.

Brussels had hoped that inflation had peaked and the news was a new drag on markets already spooked by the sovereign debt crisis.

The Frankfurt market fell by around two percent in morning trading, while Paris and London were also down, and the euro weakened against the dollar, falling briefly under the $1.35 mark.

Meanwhile, European Commission chairman Jose Manuel Barroso urged eurozone countries to involve European partners that do not use the euro -- such as Britain -- involved in making key decisions.

In an interview published in Germany's daily Sueddeutsche Zeitung, Barroso said that the 17 eurozone countries "must work more closely together and coordinate better" with the other 10 European Union members.


© 2011 AFP

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