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Greece prime minister makes plea for German support
2011-09-27
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Greek Prime Minister George Papandreou has delivered an impassioned plea to German business leaders to help his country out of its current debt crisis.

Mr Papandreou said German funding would not be an investment in past failures, but in future successes.

He also hailed Greece's "superhuman" efforts to cut its debt levels.

The prime minister is in Germany for talks with German Chancellor Angela Merkel to discuss his country's progress in cutting its budget deficit.

Mr Papandreou said the current debt crisis provided a "unique opportunity to launch important reforms that Greece badly needs to become competitive again".

Drawing parallels with the reunification of Germany, he talked of the "rebirth of a nation".

"Your contribution can be crucial," he told the assembled businessmen and women.

Mr Papandreou said that in 2010 Greece had overseen the "largest fiscal consolidation in a single year [of any eurozone member]" in reducing its budget deficit by five percentage points.
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Analysis
image of Stephen Evans Stephen Evans BBC News, Berlin

There are two big topics on the table: the possibility of writing down Greek debt so that banks that lent to Greece don't get all their money back; and progress on Greek austerity.

Chancellor Merkel is very likely to win the vote on Thursday, but people around her indicate that talk of more help for Greece beyond the current measures doesn't help them in that task, so the public emphasis is likely to be on Greek progress on austerity rather than easing Greek debt in future.

Chancellor Merkel talks of a step-by-step approach.

What German commentators read that as meaning is: secure Thursday's "yes" vote and then step forward to further measures, like more powerful rescue funds and helping banks - and then, in the long term, reforming the governing structure of the European Union.

Crisis in the eurozone: Tell us your story

By 2012, he said, the country would see a budget surplus.

The public sector in Greece had been a "major obstacle to growth, but very soon that won't be the case... we will fight our way back to growth and prosperity", he added.

Mrs Merkel responded by saying that "we respect what Greece has done in terms of structural changes. We all wish to strengthen Greece".

Mr Papandreou's visit to Germany comes as policymakers decide whether to release the latest tranche of Greek bailout funds.

The European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) are due in Athens this week to review Greece's progress in cutting its debt levels.

Together, they will decide on whether to release the latest tranche of bailout funds the Greek government needs to pay its bills.

Ahead of the visit, Greek Finance Minister Evangelos Venizelos said that his country would receive the funds next month.

More importantly, Mr Papandreou has an eye on a key vote in Germany later this week on whether to expand the powers of the eurozone bailout fund. There is a good deal of opposition in Germany to what many people there see as underwriting the entire bloc.
'Wrong idea'

Mrs Merkel, speaking to the same business leaders, said further stimulus packages were not the answer to the current debt crisis.

"We need to combine economic growth with solid public finances," the chancellor said.

"The idea that you need to boost growth by taking on ever greater debt is the wrong idea. I am deeply convinced of that."

She also dismissed the idea of issuing bonds backed by all 17 members of the eurozone - so-called eurobonds - because their adoption would result in what she called a union of debt.

European leaders are trying to agree a comprehensive package to solve the eurozone debt crisis once and for all.

However, divisions remain between member states on how best to do so.

G20 leaders met over the weekend to discuss the best way forward, but EU officials stressed that no grand plan of action had been agreed.

A number of ideas were reportedly discussed, including a 50% write-down of Greece's government debts.

Other proposals included strengthening big European banks that could be hit by any defaults on national debt obligations, and boosting the size of the eurozone bailout fund.

However, late on Monday German Finance Minister Wolfgang Schaeuble cast doubt on plans to bolster the European Financial Stability Facility (EFSF).

"We are giving it the tools so it can work if necessary," he said.

"Then we will use it effectively, but we do not have the intention of boosting its volume."

On Thursday, Germany will vote on whether to approve proposals set out in July to extend the powers of the EFSF that would allow it to buy the bonds of highly-indebted countries, and to make credit available to both governments and under-capitalised banks.
'Brutal selling'

Despite Mr Schaeuble's comments, European and Asian shares rallied strongly on hopes that leaders were finally poised to act decisively.

Germany's Dax and France's Cac 40 indexes were up about 4% in early afternoon trading, while the UK's FTSE 100 was almost 3% higher.

Japan's Nikkei index closed up 2.8%, Hong Kong's Hang Seng rose 4.2% and South Korea's Kospi climbed 5%.

However, analysts warned the gains could be short lived.

"We've experienced these types of temporary rebounds many times before, with markets coming up for air after days of brutal selling," said Kazuhiro Takahashi at Daiwa Securities.

"Again, this will likely be a short break before we see more evidence of progress in the Greek debt crisis," he said.

Markets have been extremely volatile in recent weeks as investors worry that the debt crisis may spiral out of control. They have been critical of policymakers' inability to take decisive action thus far.

On Monday, President Barack Obama also warned of the far-reaching impact of the crisis.

"[Europe] never fully dealt with all the challenges that their banking system faced... So they're now going through a financial crisis that is scaring the world," he said.

"It's now being compounded by what's happening in Greece."

Source BBC news
 





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