Merkel, Sarkozy struggle for common line on Greece crisis

17th June 2011, Comments 0 comments

The leaders of Germany and France sought on Friday to bridge critical differences on a new rescue package for debt-ridden eurozone member Greece.

"I am sure that a compromise is possible today," said Werner Hoyer, a senior official in the German foreign ministry.

"I am sure that a solution can be found by Paris and Berlin, which we can then present jointly in Brussels" at a summit next week, Hoyer told ZDF public television.

President Nicolas Sarkozy had said on Thursday on the eve of his talks with Chancellor Angela Merkel in Berlin that Europe "must leave behind national quarrels to rediscover our sense of a common destiny."

Merkel and Sarkozy have failed to see eye-to-eye on several occasions over the past few bumpy years for the eurozone, a currency union that Berlin and Paris were the driving forces in forging.

Amid a much-rumoured lack of personal chemistry, the two leaders have differed on the size of stimulus packages, rescue mechanisms, austerity packages and the measures needed to prevent another crisis taking place.

Away from economic matters, they have disagreed on issues from military action in Libya, recognition of a Palestinian state, Sarkozy's idea for a Mediterranean Union to Germany's exit from nuclear power.

The latest disagreement, a week ahead of an EU summit in Brussels, is over how to nudge banks, pension funds and insurers into agreeing to restructure their existing debt exposure to Greece over a longer timeframe, thereby suffering a financial cost.

"There is a serious difference of opinion," the Sueddeutsche Zeitung quoted a source in the German government as saying.

Merkel heads a group of blue-chip eurozone economies bent on pressing private investors to contribute up to a third of the second rescue package by accepting later repayment on their Greek bonds.

But Sarkozy backs the European Central Bank (ECB) and the European Commission, which want the private sector to contribute on a "voluntary" basis, hoping thereby to avoid any action that ratings agencies might deem a default.

"Everyone is waiting for Sarkozy and Merkel for an indication at least to roughly what kind of deal we can expect, not necessarily today but at least next week," Deutsche Bank economist Gilles Moec told AFP.

Europe on Thursday sought to buy time, with the EU's economic affairs commissioner Olli Rehn saying Greece could receive a 12-billion-euro ($17.0-billion) fifth tranche of loans under last year's first bailout.

He stressed that commitments as to the scale and scope of the second Greek rescue package -- tipped to be almost as big as the 110-billion-euro first one -- could wait until a July 11 meeting to be thrashed out.

An EU diplomatic source told AFP that the finer details could even wait until September, a position supported by Berlin, according to German media reports on Friday.

Rehn said the new phased approach "will avoid the default scenario" but warned that responsibility also fell on Greece.

Greece, though, is in political turmoil, with Prime Minister George Papandreou on Friday axing his finance minister Friday in a reshuffle a day after a party revolt by disgruntled backbenchers and angry protests in Athens.

© 2011 AFP

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