New talks step up efforts to head off Greek default

28th September 2011, Comments 0 comments

Germany and Greece held new crisis talks Tuesday as European governments ratcheted up steps to head off a default by Athens which could be calamitous for the eurozone.

German Chancellor Angela Merkel headed into a private working dinner with Greece's prime minister, George Papandreou, pledging "all the help required" as Athens implements tough austerity reforms.

No information on the outcome of their discussions was immediately available.

After a day of wooing businessmen in the German capital, Papandreou said Greece was determined to implement reforms "not only to overcome the present crisis, but to make Greece more competitive."

"We want a strong Greece in the euro area... Germany is ready to give all the help required," Merkel said just before the dinner, a key meeting as Greece seeks the release of a new tranche of bailout funds to avoid default on debts and other obligations.

The dinner came after European and US markets rebounded strongly a second straight day on hopes that Europe's leaders were closing in on a solution to the public debt crisis rattling the 17-nation eurozone.

The Paris CAC-40 index soared 5.7 percent, Frankfurt's DAX jumped 5.3 percent and London's FTSE-100 index climbed 4.2 percent. In the United States, the Dow Jones Industrial Average added 1.3 percent.

Asian shares joined the rally after heavy falls Monday.

The Greek parliament approved a controversial property tax Tuesday, a key step in a bid to plug a budget hole and help unlock bailout funds needed to prevent a sovereign debt default that could come as early as next month.

Greece was making a "superhuman effort" to bring down its debt, Papandreou insisted.

"I can guarantee that Greece will live up to all its commitments. I promise you we Greeks will soon fight our way back to growth and prosperity after this period of pain," Papandreou said.

The Berlin working dinner came amid increasing speculation that Greece could default, with the next installment of debt aid due under its May 2010 bailout from the European Union and the International Monetary Fund hanging fire as officials review the country's finances.

Athens says the eight-billion-euro payment is essential to continue paying its bills.

Chief auditors from the IMF, EU and the European Central Bank will return to Athens on Wednesday or Thursday, eurozone chief Jean-Claude Juncker told the European Parliament, nearly a month after they broke off their review of Greece's finances over reported concerns about reform implementation.

In Athens, Greek Finance Minister Evangelos Venizelos insisted the bailout payment would be made "on time" in October, repeating assurances that the country would not default.

Officials say Greece may announce a number of privatisation deals this week as the debt-wracked country comes under increasing pressure from its creditors to meet tough fiscal targets.

Papandreou said a decision by European leaders on July 21 to expand the scope and size of the EU's rescue fund -- the European Financial Stability Facility (EFSF) -- was a "step in the right direction" that would give Greece "breathing space" until reforms start to produce results.

Germany has made it clear that it was opposed to ploughing more money into the proposed 440-billion-euro ($590 billion) EFSF, not least because that could pull fellow eurozone members into the debt vortex.

"There is full agreement within the federal government that the EFSF, as it will be voted on by parliament on Thursday, stands precisely as was agreed on July 21" by eurozone leaders, German government spokesman Steffen Seibert told a regular press conference.

Merkel said it was "of the utmost importance" that the legislation should pass.

Slovenia's parliament on Tuesday approved the enhanced EFSF, the ninth of the 17 eurozone countries to do so.

Media reports have suggested that international rating agencies could downgrade the top-notch "AAA"-rating on German sovereign debt if the fund's ceiling is increased, because Germany, as Europe's paymaster, would have to foot most of the bill.

French Prime Minister Francois Fillon on Tuesday fueled expectations there could be more firepower on the way for Greece, saying new French proposals may be upcoming after the German parliament vote.

Earlier, Germany bristled at remarks made Monday by US President Barack Obama warning that the eurozone debt crisis is "scaring the world."

"It's always much easier to give advice to others than to decide for yourself. I am well prepared to give advice to the US government," German Foreign Minister Wolfgang Schaeuble said.

"Even if Obama is thinking the opposite, I don't think the problems of Europe are the reason for the problems of the US."

US Secretary of State Hillary Clinton joined the chorus of US appeals for European action.

"We expect European leaders to continue to ensure that the response to this crisis is strong, flexible, and most importantly, effective," she said.

© 2011 AFP

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