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Europe split in Greek bailout row

Europe split in Greek bailout row
AFP
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First Published: Mon, Apr 26 2010. 04 34 PM IST
Updated: Mon, Apr 26 2010. 04 34 PM IST
Luxembourg: The European Union was split Monday over an economic bailout plan for Greece, with Germany warning against “taking the pressure off” while Italy lashed Berlin for “intransigence.”
“Making promises of concrete aid too soon will only have the effect of taking the pressure off Greece,” German Foreign Minister Guido Westerwelle said of plans for €45 billion ($60 billion) in emergency loans from the European Union and the IMF this year.
“Above all, we need to see budget consolidation taking place in Greece,” said Westerwelle, whose governing coalition is facing a tricky regional election on 9 May.
Otherwise Athens will not be obliged to act “with the necessary application and discipline” over future years, he warned.
The Greek government formally asked for help on Friday, but a succession of statements out of Berlin outlining new conditions Athens must fulfill before Germany will cough up have introduced fresh doubts on the timing of a rescue, which officials had said could be agreed within days.
Political opponents who are pushing for tax cuts for small and medium-sized businesses have threatened to challenge Merkel’s coalition in Germany’s constitutional court before the loans can be handed over, while any eventual aid would also require the approval of the German parliament.
As markets sense obstacles requiring renewed agreement from national leaders, Greece’s cost of borrowing rose above 9% for the first time whereas the funds from its 15 euro currency partners were to have been available for around 5%.
As Europe’s largest economy, Germany was expected to contribute around €8.4 billion, but its stance is causing consternation among worried euro partners.
Italian Foreign Minister Franco Frattini said German Chancellor Angela Merkel’s government was threatening the entire euro currency area, which is also beset by worries over deficits and debts in other countries led by Portugal, Ireland and Spain.
“I am concerned by the intransigence Germany is showing,” Frattini said, raising the spectre of further drawn-out rows before any money is handed over.
“There can be no doubt -- if the (shared) house is in difficulty we have to save the walls because we are all in this (shared) house,” the Italian minister insisted.
“This is not a rescue operation (for Greece), this is a consolidation of Europe’s walls, the walls of the euro, it’s a rescue for all of us,” Frattini underlined.
As the rate on Greek 10-year debt reached 9.116% on Monday, Greek Prime Minister George Papandreou was berated at home for calling on a lifeline that could take weeks to put in place and require further Greek sacrifices on top of already controversial austerity cuts.
Conservative opposition leader Antonis Samaras accused the government of placing the country under the “suffocating control” of the IMF.
On Sunday, International Monetary Fund managing director Dominique Strauss-Kahn said there was a “need for speed” but stressed he was “confident” that negotiations could be concluded “in time to meet Greece’s needs.”
More than eight billion euros of Greek debt was set to mature by 19 May.
The European Commission and the European Central Bank are due to deliver their assessment on Greece’s needs within days, but a senior EU official warned on Sunday that Germany would have to “explain” its opposition “if the euro area.
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First Published: Mon, Apr 26 2010. 04 34 PM IST
More Topics: Greece | Finance | Economy | Debts | Aid |