France, Germany pledge to spring into action with Greek rescue

3rd May 2010, Comments 0 comments

France and Germany are ready to act quickly to unlock a massive rescue plan for Greece, President Nicolas Sarkozy's office said Saturday as negotiators put the final touches to the aid package.

Sarkozy spoke by phone with German Chancellor Angela Merkel and they both "reaffirmed their determination to act quickly to implement the support plan" once spending cuts are agreed with Athens, said an Elysee statement.

Greece is negotiating a three-year bailout plan of between 100 and 120 billion euros (133-160 billion dollars) with the European Union and the International Monetary Fund to avoid defaulting on its debt.

France will be the second largest eurozone contributor to the Greek package after Germany.

Elysee officials have repeatedly said that Greece must not be allowed to become the "Lehman Brothers of Europe", referring to the 2008 collapse of the US investment bank that sparked the world's worst financial crisis in decades.

But France's readiness to act quickly has met with resistance from Germany where Merkel is facing strong public opposition to saving Greece's economy with German taxpayer money.

Back from a state visit to China, Sarkozy spoke with Merkel ahead of a top-level meeting at the Elysee with Finance Minister Christine Lagarde, Foreign Minister Bernard Kouchner and central bank governor Christian Noyer among others.

Lagarde confirmed to reporters that the Greek rescue deal will total between 100 and 120 billion euros. An official in Athens told AFP the plan will be announced at a cabinet meeting on Sunday.

Finance ministers of the 16-nation eurozone are to meet Sunday to discuss the terms for the bailout expected to reach 45 billion euros this year alone, of which 30 billion will come from European countries.

The German and French parliaments are set to vote on loan packages next week, setting the wheels in motion for EU leaders to give the final go-ahead for the massive rescue at their summit on May 10.

In addition, France and Germany will "over the coming days take measures" to step up monitoring of eurozone financial markets and look at tighter regulation of rating agencies, said the Elysee statement.

Greece's efforts to climb out of debt suffered a blow this week when Standard and Poors slashed Athens' credit rating to junk status and also downgraded the ratings for Portugal and Spain.

The Elysee meeting came two days before the National Assembly is to vote on extending loans of up to 6.3 billion euros -- of which 3.9 billion would be unlocked this year -- to help Greece meet its debt refinancing obligations.

The two German federal houses of parliament could decide by Friday whether to allow Berlin to loan some 8.4 billion euros to Greece, according to leaders of Merkel's party.

The National Assembly is set to adopt a supplementary budget bill late Monday or Tuesday at the latest, with all parties in agreement that quick action is needed to prevent contagion across the eurozone.

France's opposition Socialists have accused European leaders of foot-dragging and warned that without strong action, the Greek crisis could trigger a disastrous chain reaction across Europe.

"If this crisis in public finances is not settled, all of Europe will succumb to a second very serious financial crisis," wrote Socialist deputies Michel Sapin and Jean-Christophe Cambadelis in a joint statement.

"The Europeans must understand that by helping a member state and today that happens to be Greece, it is the full eurozone that they are helping," they said.

Once adopted by the National Assembly, the French contribution to the Greek rescue package will go to the Senate later in the week.

© 2010 AFP

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