Eurozone in broad agreement on debt crisis: France

20th July 2011, Comments 0 comments

France insisted on Wednesday that the eurozone was in harmony on the eve of a critical summit to rescue Greece from a debt default, playing down divisions over what burden banks should bear.

"There is a very broad convergence of views," French Finance Minister Francois Baroin told France Info radio, a day before eurozone leaders were to meet in Brussels to try to agree on a second bailout for debt-ridden Greece.

"There is a will to make Greece's debt more manageable and there are still discussions to be had about the share of the private sector," he said, referring to the divisive question of the banks' role.

"But it is more a discussion of the extent (of private banks' involvement), not of basic values."

Germany wants the private banks that lend to Greece to agree to ease its debt burden. France insists such involvement must be voluntary so banks are not perceived to be writing off part of Greece's debt.

Other tools available to eurozone leaders include emergency rescue funds, taxes on banks and new loan agreements structured in such a way as to avoid an effective debt default.

All wish to avoid the latter, cautiously referred to by officials as an "event".

"Most of all, we do not want a credit event, that is to say a restructuring of Greek debt," Baroin said.

Analysts warn that if the right deal is not struck, investors could lose confidence in Greece altogether, potentially obliging it to drop the euro and spreading panic to bigger economies such as Italy and Spain.

French President Nicolas Sarkozy and German Chancellor Angela Merkel were due to meet in Berlin later on Wednesday to prepare for Thursday's summit.

Merkel on Tuesday played down expectations that the summit would yield a "spectacular step" forward in solving the crisis.

© 2011 AFP

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