Merkel says Greece should not be focus of EU summit

BERLIN Sun Mar 21, 2010 6:16am EDT

BERLIN (Reuters) - Greece does not need any financial support and European Union leaders should not make the question of aid for the indebted country a focus of their summit this week in Brussels, Chancellor Angela Merkel said on Sunday.

In an interview with Deutschlandfunk radio, Merkel said she feared causing turbulence in financial markets by raising "false expectations" about aid. She reiterated Greece has to sort out its own debt problems for the good of the euro single currency.

European Commission President Jose Manuel Barroso has urged EU member states to agree a standby aid package Greece at a summit in Brussels March 25-26 after Athens said it might have to turn to the IMF for help.

"There's no looming insolvency," Merkel said on Sunday. "I don't believe that Greece has any acute financial needs from the European community and that's what the Greek prime minister keeps telling me."

Barroso said on Friday the 16 countries that share the euro should be ready to make coordinated bilateral loans to Greece to help it reduce its budget deficit and refinance its debts, which are nearing 120 percent of gross domestic product.

In a move that appeared designed to shake EU member states into action and in particular to win German backing for a rescue package, Barroso said the situation could not be allowed to be go on for much longer and action was needed rapidly.


But Merkel rejected that with unusually clear language.

"I don't see that Greece needs money at the moment and the Greek government has confirmed that. That's why I'd urge us not to stir up turbulence in the markets by raising false expectations for Thursday's council meeting," she said.

"I believe that, as long as Greece doesn't need help, this issue doesn't have to be at the forefront of our talks," Merkel added. "Aid will not be on the agenda at the meeting on Thursday because Greece says itself it doesn't need help right now."

EU leaders are nevertheless expected to discuss the issue after Greece said it could not deliver promised deficit cuts if its borrowing costs remained so high and that it may have to seek help from the International Monetary Fund.

Some members of the euro zone believe the bloc itself should help Greece sort out its problems and see resorting to the IMF as a sign of weakness that would damage the currency union's credibility.

Barroso did not say how much aid Greece would need but diplomatic sources put the figure at up to 22 billion euros. Athens has not requested any aid and hopes it will not need it.

But he said Greece's situation could not be allowed to go unchecked and that EU member states must work together quickly.

Despite the EU's verbal assurances of support, it could prove difficult for the euro zone to construct a financial safety net for its most heavily indebted member, largely because of German reluctance.

Germany is concerned that such aid could set a precedent for other euro zone members in financial difficulty. It is also worried that financial support could be challenged in the country's Constitutional Court because EU rules expressly forbid a bailout of a single currency member by its euro zone partners. Merkel said she does not expect Greece to ask for aid.

"I'll say it once again -- I don't see those expectations," she said. "Greece would like to have a certain clarity for an eventuality it can't completely rule out.

"But I'll say it again: The best solution for the euro is for Greece to resolves its problems by itself -- naturally with political support from European leaders."

(Editing by Noah Barkin)

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Comments (4)
Kina wrote:
We suggested that Greece may threaten default to gain the attention of the EU, especially Germany.

And this is what Greece has done in a round about way. Greece has mentioned defaulting in the context that it wont need to, but mentioning default was totally unnecessary and designed to put a little fear into the market and EU.

Greece is trying hard to get access to cheaper rates through the EU. Which right or wrong is understandable. The cuts it has made to its budget will be totally undone if it has to pay premium rates on debt. And it will inevitably drive Greece deeper into recession and heighten the risk of default.

The EU has handled this very badly because the reality is that Germany will offer nothing. So the market now knows that EU countries under pressure will get no ‘real’ help. This has undermined confidence in the EU.

When it is Spain’s turn to face this problem it will now be much worse and the market even less forgiving.

Mar 21, 2010 7:22am EDT  --  Report as abuse
amarillis wrote:
I am not Greek, neither German but as outside onlooker I don’t see why Germany should offer any cash to Greece?We all know it is not going to happen.Unlike the USA these are sovereign countries that conduct their own fiscal policies.There is no polotical union therefore assumed shared fiscal responsibility.Greece got themself into this mess, they shouldn’t expect preferentiel treatment in regards to interest rates or financial aid.Excuse me, but the situation here is your neighbour goes belly up,now how it is your responsibility to provide him financial aid or whatever, especially since you are in debts yourself?I think Greece need to gets a serious grip on reality here and stop expecting somebody owes them anything at all.They simply don’t.They can’t borrow no more?They should declare insolvency.Simple.

Mar 21, 2010 9:42am EDT  --  Report as abuse
investeast wrote:
Greece is currently a part of a politically conjoined Europe.

The core cause of Greek economic problems were caused by rogue bankers throughout Europe and the USA exacerbated by poor fiscal controls.

If the EU is unwilling to assist those member countries in difficulties then there is little point in maintaining an EU administration costing EUR 264 billion. Also – little point in maintaining the EURO, with a central Bank whose policies do nothing to maintain competitiveness of industry.

Sack the lot of these spongers on society and let us get back to basic national governments working under a regional trade agreement – no more complicated than this.

Enough of Global trade agreements.

Mar 21, 2010 1:42pm EDT  --  Report as abuse
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