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Eurozone aid for Greece comes one step closer

Published 08 March 2010 - Updated 09 March 2010
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French President Nicolas Sarkozy promised on Sunday (7 March) that eurozone countries would help Greece if its financial problems worsened. Meanwhile, German Finance Minister Wolfgang Schaeuble said he plans to make proposals soon on a new European institution to help ensure the stability of the euro zone.

Sarkozy was speaking after talks with Greek Prime Minister George Papandreou, who is looking to secure pledges of support from European capitals that will reassure markets and lower the debt-stricken country's high borrowing costs.

"If Greece needs help, we will be there," Sarkozy said at a joint news conference.

"The main actors on the European stage [have] decided to do whatever is needed to make sure Greece is not isolated," he added, declining to give precise details of any aid plans but stressing that his economy minister was drawing up measures.

"Christine Lagarde, in tandem with her colleagues in the euro zone and in Europe [...] is working on a certain number of precise measures if Greece needs them," he said.

Papandreou met German Chancellor Angela Merkel and Luxembourg Prime Minister Jean-Claude Juncker on Friday. He had been hoping for specifics of a possible aid package and on Sunday told reporters he saw the outlines of a plan.

"After my meetings more specific ways are beginning to emerge about how to deal with any possible borrowing problems," he told reporters. He is due to fly to Washington later on Sunday for meetings with US leaders.

Sarkozy talked to Merkel earlier in the day by telephone and said that France, Germany and Greece were ready to take concerted action against market speculation aimed at Greece.

Sarkozy agreed that speculators were artificially hiking the cost of borrowing for Greece and said they needed to be tackled.

"This problem could hit lots of countries if we don't come up with a collective response," he said.

"Concrete, precise means exist [to combat speculators] which we won't be communicating tonight [...] but which at the given moment will show that Greece is not just being supported politically, but also in all aspects of any eventual requests."

Towards a European IMF

Meanwhile, German Finance Minister Wolfgang Schaeuble said in a newspaper interview released on Saturday (6 March) that he plans to make proposals soon on a new European institution to help ensure the stability of the euro zone.

"We are not planning an institution in competition with the International Monetary Fund but for the internal structure of the euro zone we need an institution that commands the experience of the IMF and similar executive powers," Schaeuble told Welt am Sonntag. "I will make proposals on this soon."

Schaeuble said he favoured stronger EU economic policy coordination and that he was working with EU and G20 partners to push for improved transparency of credit default swaps.

"We cannot allow our joint currency to become a ball for international speculators to play with," he said.

(EurActiv with Reuters.)

Positions: 

In an open letter to European Commission President José Manuel Barroso, the Party of European Socialists (PES) called for a long-term crisis management mechanism as a solution to ongoing instability in the euro zone.

This 'European Mechanism for Financial Stability' would consist of a 'trustee fund' established by the euro-area member states, which can borrow funds on the markets. "The fund can then provide a conditional loan to a member state facing difficulties in accessing financing at a fair price due to speculative pressures," reads a statement by the PES.

The fund would be establised based on Article 122 of the Lisbon Treaty and "does not involve any transfer of funds from the member states to their partners," says the PES statement, which stresses that the mechanism is "only intended to ensure that speculative attacks on sovereign debts in the euro area will quickly become a thing of the past". 

Background: 

Greece is sitting on debts that are expected to hit 290 billion euro this year and has a budget deficit of 12.7% of gross domestic product, more than four times the EU limit. 

The cost of servicing that debt has risen, hitting the euro currency and prompting speculation over a bailout plan (EurActiv 04/02/10).

In February, the European Commission endorsed a Greek plan to cut its budget deficit below the EU ceiling of 3% of GDP by the end of 2012, but insisted on tough surveillance measures to make sure the plan is followed through effectively (EurActiv 03/02/10).

European leaders sought to prop up Greece with words of support at a summit on 11 February but failed to offer concrete proposals to help the country, citing "strategic" reasons (EurActiv 11/02/10).

On 3 March, Greece unveiled a draconian 4.8 billion euro austerity programme targeted at civil servants, the rich and the church in a move designed to secure European help in tackling its crippling debt burden (EurActiv 04/03/10).

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