Tags: EU | Europe | Financial | Crisis

France Says Greece Vows to Stick to Tight Spending Plans

Friday, 30 Sep 2011 02:45 PM

 

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President Nicolas Sarkozy said Greece's leader pledged in a meeting Friday to carry through with wrenching reforms to Greece's economy despite increasing public anger and protests in the streets.

Sarkozy said Europe would support Greece in its painful economic restructuring because "the failure of Greece would be a failure of all Europe."

He spoke after talks in Paris with Greek Prime Minister George Papandreou on Europe's tortured attempts to prop up the debt-choked Mediterranean country.

Describing Europe as "a family," Sarkozy said "when one member of a family is in difficulty, the other members must act to help them."

The Greek leader called the meeting "very constructive" and invited Greece's European partners to send observers to verify firsthand Greece's commitment to meeting its economic reform goals.

"I told President Sarkozy that any country who wants to can send experts to see what we are doing ... the sacrifices the Greek people are making to change their country," Papandreou said.

Greece was saved from default by an initial 110 billion euros ($150 billion) bailout in May last year. A planned second bailout of 109 billion euros for Greece this year includes a voluntary participation by private bondholders, who agreed to write off about 20 percent on their Greek debt holdings.

Many experts, however, say those writedowns should be closer to 50 percent. The debate among European leaders now is whether to allow such a move under controlled conditions, providing help to banks that may take heavy losses on Greek bonds they hold. Those private shareholders include large French banks.

France has so far insisted that Greece's second bailout package should not be altered, even though German Chancellor Angela Merkel said this week she was open to a renegotiation of its terms.

Sarkozy has striven to show a unified position with Merkel, but financial markets were spooked this week by signs of a widening disagreement between France and Germany, the eurozone's two largest members. Stocks were down again on Friday, ending on a downbeat note for the third quarter, which has seen the sharpest market losses since 2008.

Sarkozy reiterated that France and Germany are in "total agreement" on how to handle the Greek crisis and said he would meet Merkel in Germany "in the coming days" to discuss further accelerating the eurozone's economic integration.

Papandreou is on a European tour, having met with Merkel on Tuesday, to drum up support for Greece. He has stressed the importance of the EU's July 21 agreement, under which Greece was granted its second bailout, and insists Greece will meet its debt and deficit targets.

The July deal has yet to be ratified, and is still making its way through the eurozone's 17 capitals.

Part of the July deal was to expand the size and powers of Europe's rescue fund, the European Financial Stability Facility. German, Cypriot and Austrian lawmakers were the latest to approve the measure. France approved the deal earlier this month.

On Thursday, officials from the International Monetary Fund, European Central Bank and European Commission — known as the troika — resumed their review of reforms Greece must make to qualify for its latest installment of bailout loans.

The troika had been expected to approve Greece's next batch of loans, worth 8 billion euros ($11 billion), in early September. Greece says without the loans, it only has enough funds to get through mid-October before facing bankruptcy.

The slow pace of progress in the debt crisis has caused markets to fall sharply over the past months and fueled calls for an overhaul of the economic governance of the euro.

A power struggle has emerged between the central EU office in Brussels and national governments over who should govern Europe.

The head of the EU's executive, Jose Manuel Barroso, said day-to-day decision-making needed to be centralized in European bureaucracies, above sovereign nations. But France and Germany, which represent about half of the bloc's output, have proposed holding two annual summits where eurozone governments would focus on economic policy.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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