Financial Technology

Financial Technology

Share
June 23, 2011

EU leaders pressure Greek opposition



BRUSSELS (AP) — European Union leaders stepped forcefully into Greece's national politics on Thursday, urging the leader of the opposition to rally with the government to find a way out of its financial meltdown and protect the euro.

Several EU heads of government directly targeted opposition leader Antonis Samaras and told him to do his utmost to join ranks and fight the crisis together.

"When it comes to Greece, we call on the opposition to fulfill its historical responsibility," German Chancellor Angela Merkel said.

Dutch Prime Minister Rutte promised to support Greek politicians showing unity. "A nation undivided, focused and fully committed will not be abandoned," he said.

Many said the Greek opposition had no choice.

"It is very important that no Greek political leader tells the Greek people that they have a shortcut," Swedish Prime Minister Fredrik Reinfeldt said ahead of a two–day summit.

The plea to a national opposition leader, rare in EU politics, underscored the emergency Greece and the 17 nations using the euro currency face.

Eurozone governments earlier this week delayed a final decision on new aid for Greece until July 3, when they will know whether its parliament has accepted massive new budget cuts, government asset sales and economic reforms.

The Greek opposition is threatening to block those budget cuts. Samaras has dampened hopes for a cross–party consensus on the spending cuts, tax increases and economic reforms designed to shave some euro28 billion off the Greek budget in coming years.

"The current policy mix, implemented by the Socialist government, calls for more taxes in an economy in unprecedented recession," he said at a pre–summit meetings in Brussels of conservative leaders. "We need corrected policy measures to ensure that the economy recovers and that we can pay back our debt."

EU leaders were also expected to reinforce their message of fiscal austerity to Greek Prime Minister George Papandreou. Papandreou was due to hold talks with Merkel, French President Nicolas Sarkozy, EU President Herman Van Rompuy and European Central Bank President Jean–Claude Trichet ahead of the official summit.

However, Merkel warned not to expect any "operational decisions" on Greece at Thursday's and Friday's meetings.

Athens faces default if it doesn't get a euro12 billion ($17 billion) installment from its existing euro110 billion bailout by mid–July. Papandreou's government is also engaged in talks for a second package of rescue loans, roughly equal in size to the current one.

The standoff offered the prospect of a tense summit.

"We are now, in fact, living through critical days and weeks," said the EU's Monetary Affairs Commissioner Olli Rehn.

In a last–ditch attempt to sweeten the austerity measures for voters and the parliament in Athens, European Commission President Jose Manuel Barroso will urge leaders to help Greece access billions in EU development funds to create jobs and make its businesses more competitive.

The funds are designed to help underdeveloped regions catch up with richer parts of the 27–nation bloc. About euro15 billion ($22 billion) is still available for Greece until 2013, but the country is struggling to prove it can use the funds well and come up with matching financing.

However, Barroso's proposal faces serious resistance, as some countries are reluctant to make any concessions to Greece before the parliament vote.

"We are ready to look into it in a constructive way, how we can do something in a wise manner," a German government official said Wednesday. "But the precondition is that the austerity measures pass the Greek parliament before." The official declined to be named in line with department policy.

Other, poorer countries are likely to frown at easing the rules for just one country.

Leaders will also take another look at finance ministers' decision to ask banks and other private creditors to share the burden of a second massive bailout for Greece, on top of the euro110 billion ($158 billion) the country was granted a year ago.

The German official said discussions with banks have already started, adding that the eurozone was in close talks with rating agencies and the European Central Bank to avoid triggering a negative rating.

If rating agencies declared Greece to be in partial default of its debts, that could spark panic on financial markets, hurt Greek and European banks and endanger other EU nations struggling with heavy debt.

The divisions among EU countries are reaching beyond the problems of Greece.

Another key item planned for the summit — the formal appointment of Mario Draghi as the new president of the European Central Bank — may be put off as fellow Italian executive board member Lorenzo Bini Smaghi has refused to leave his post.

The French, who with the departure of current ECB President Jean–Claude Trichet on Oct. 31 would not have a representative on the board, will only support Draghi if a Frenchman or a woman takes over Smaghi's spot.

European finance ministers, the European Parliament and the board of the ECB have already backed Draghi, but without the formal approval of the leaders his appointment will not be valid.

__

Raf Casert contributed to this story.



Share


Comments powered by Disqus


FREE eNewsletter

Financial Technology Industry News