France's Sarkozy: Europe Will Stand by Greece

Monday, 08 Mar 2010 08:08 AM

 

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French President Nicolas Sarkozy promised Greece on Sunday that euro zone countries would help it overcome its financial problems and vowed a European crackdown on financial speculators Athens blames for its woes.

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

"The main actors on the European stage are decided to do whatever is needed to make sure Greece is not isolated," Sarkozy said, ruling out immediate financial backing, but stressing that his economy minister was drawing up aid scenarios.

"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 hem," he said, standing alongside the Greek prime minister.

Papandreou met German Chancellor Angela Merkel and Luxembourg Prime Minister ean-Claude Juncker on Friday and is will fly to Washington later on Sunday to see U.S. leaders.

He came out of Friday's meetings looking disappointed at the lack of specific pledges, despite his widely applauded efforts to curb the Greek deficit. He was much more upbeat on Sunday.

"After my meetings more specific ways are beginning to emerge about how to deal with any possible borrowing problems," he said, adding that measures would be announced shortly to tackle speculators profiting from Greek financial difficulties.

Greece says abuse of credit default swaps, used to insure against default, has pushed up debt costs and Papandreou told reporters that France, Germany and Juncker were ready to act.

"Tomorrow or the day after you will know about it. It is an initiative aimed at finding a solution to the speculators," he said, adding that he would seek American support for the move when he met U.S. President Barack Obama next week.

Germany has appeared particularly reluctant to ride to Athens's rescue, with public opinion opposed to giving handouts to a country that has failed to address its budget problems for years, but Sarkozy said no one should doubt Merkel's commitment.

"I believe in German solidarity," said the president, who spoke to Merkel at length earlier in the day by telephone.

Greece unveiled a 4.8 billion euro ($6.52 billion) austerity package last week to hack back its double-digit deficit, winning it some breathing space on the markets.

But although the spread between Greek and German 10-year bonds narrowed, analysts say the yields are still too high for the long term sustainability of the country's finances.

Papandreou has told Europeans he may have to turn to the International Monetary Fund if EU assistance is not forthcoming.

Sarkozy reiterated on Sunday his opposition to a bail out by the IMF, which is headed by his political rival Dominique Strauss-Kahn, and Papandreou said this option was receding.

"When Europe starts moving, a European solution starts becoming more credible," he said.

Some EU finance ministers have suggested setting up a new European institution that could offer IMF-like assistance to euro zone countries that hit financial difficulties. Papandreou said he would welcome this, but saw it as a longer term project.

"This does not help us deal with any short term problems the country might have," he said.

Markets are closely watching whether the Greek public will accept the government's belt-tightening or take to the streets.

Police said 12,000 protestors took part in marches in the capital on Friday, but so far the demonstrations have been much more low key than violent riots seen in 2008.

Opinion polls at the weekend showed Greeks were roughly divided over the tax hikes and savings unveiled last week.

However they also showed strong opposition to some of the main elements of the austerity package, including a rise in value added tax (VAT), a 30 percent cut in public sector holiday bonuses and a pension freeze.

One survey from Alco showed that 86.2 percent of respondents considered the new cuts unfair and that 64 percent were unconvinced Papandreou's latest package would pull Greece out of its debt crisis.

© 2014 Thomson/Reuters. All rights reserved.

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