PARIS, February 6, 2012 (AFP) - Europe piled pressure Monday on Greece to accept more spending cuts and reforms, and suggested bailout funds be put aside to cover interest payments as a deal with banks to cut its debt remained elusive.
Chancellor Angela Merkel flew to Paris to back up her ally President Nicolas Sarkozy in his struggle for re-election and urge Greece to act quickly to agree a deal with public and private creditors to clean up its finances.
"With the chancellor, we are saying that the Greek situation should be sorted out once and for all. The Greeks gave us undertakings. They should respect them scrupulously. There's no choice," Sarkozy said.
Sarkozy suggested an escrow account be created into which part of bailout funds would be funnelled specifically and only to service interest on Greek debt.
Such an arrangement may help conclude a deal with private creditors on cutting 100 billion euros ($130 billion) off Greece's debt, but Athens has been very sensitive to any moves it sees as infringing on its financial sovereignty.
Merkel said she was "favourable" to such an idea, but called for a rapid resolution ot the crisis, adding: "I don't really understand the interest in letting more time go by. Time is pressing."
The French and German leaders also warned that no further European aid would come Athens' way until an agreement is reached.
But there was little visible progress in Athens on Monday.
As Greek Prime Minister Lucas Papademos was due to meet for cliff-hanger talks with European Union and IMF officials on conditions as part of a planned second rescue programme worth 130 billion euros, the country's main two unions called a 24-hour general strike for Tuesday.
Labour leaders argue that the public sector cuts being demanded by Greece's international partners amount to a death sentence for the country and demanded a return to fiscal sovereignty for the ailing eurozone member.
Papademos met officials from the EU, European Central Bank and International Monetary Fund around midday and was supposed to see the heads of the Greek socialist, conservative, and far-right parties, the premier's office said.
But the second meeting was delayed and "will very probably be held on Tuesday," a Greek government source told AFP, adding: "The negotiations continue, there are still questions to address."
The delay risked angering European leaders.
"The truth is that we are already past the deadline," said Amadeu Altafaj, a spokesman for EU commissioner Olli Rehn. "The ball is in the Greeks' court."
But an EU diplomatic source suggested all was not lost.
"We haven't lost all hope, we hope that between now and Wednesday evening, the negotiations will be wrapped up," the source told AFP, referring to public financing as the massive write-down of privately-held debt appeared all-but settled.
Greece is also trying to wrap up weeks of negotiations with private banks to avoid a historic default in mid-March that could disrupt the 17-nation eurozone and possibly hobble a global economic recovery.
In Washington, the IMF warned that an escalation of Europe's debt crisis could slash China's economic growth in half this year, urging Beijing to prepare stimulus measures to head off any risk if exports fall.
Meanwhile, Merkel and the bulk of the German cabinet descended on Paris on a mission to strengthen Sarkozy's reforming resolve and kick-start his struggling re-election campaign.
That the pair should chair what was 14th joint Franco-German cabinet session was not unusual but the joint television interview that they were to give afterwards was billed as an unprecedented cross-border endorsement.
France and Germany were once seen as the twin motor of the European Union but Paris is now clearly the junior partner, its economy lagging behind, and Sarkozy has turned to his fellow right-wing leader for ideas.
Sarkozy trails Socialist challenger Francois Hollande in the opinion polls, less than 80 days before the election, and Merkel fears a new left-wing French administration would oppose her austerity plans.
Specifically, Hollande has said he will seek to re-negotiate the hard-won eurozone "fiscal compact" that Merkel sees as essential to binding the single currency bloc together behind her deficit-cutting agenda.
Sarkozy, smarting from France's loss of its top AAA credit rating, now cites Germany's success almost daily to justify his own policies, drawing inspiration from both Merkel and her centre-left predecessor Gerhard Schroeder.
Paris and Berlin are seeking measures to prevent future crises and restart growth, while keeping a close eye on Greece and other weaker Mediterranean countries in case any backsliding on austerity measures spooks the markets.
Monday's talks concentrated on ways of harmonising corporate tax rates across the Rhine and on plans for a new financial transactions tax.
Both support the idea of such a tax -- mocked as "madness" by their British colleague Prime Minister David Cameron, who fears it would drive finance houses out of Europe -- but differences remain.
Sarkozy is so determined to burnish his credentials as a reformer in the twilight of his first term that he vowed France will go it alone with a 0.1 percent tax by August. Merkel still hopes for a joint European measure.
Meanwhile, the debt crisis claimed another victim on the periphery of the European economy when Romania's centre-right Prime Minister Emil Boc resigned after days of street protests against his government.
0 comments:
Please add comment to express your opinion, and share it on Twitter or Facebook. Thank you in advance.