Germany, France reach accord on Greek bailout

BERLIN/PARIS Wed Jul 20, 2011 7:52pm EDT

Several one euro coins are pictured in flames in this illustration photo taken in Vienna July 19, 2011. REUTERS/Lisi Niesner

Several one euro coins are pictured in flames in this illustration photo taken in Vienna July 19, 2011.

Credit: Reuters/Lisi Niesner

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BERLIN/PARIS (Reuters) - Germany and France have reached a common position on a second bailout of Greece in their effort to prevent the country's debt crisis from spreading through Europe, officials said on Thursday.

The accord came after seven hours of talks late into Wednesday night between German Chancellor Angela Merkel and French President Nicolas Sarkozy in Berlin, sources in both governments said.

Details of the common position were not revealed, but the French delegation said it would include a contribution to the Greek bailout by Europe's banking sector. European Central Bank President Jean-Claude Trichet joined Merkel and Sarkozy for part of their talks.

The Franco-German accord will now be presented to a summit in Brussels on Thursday of all 17 leaders of the single currency area to address the Greek crisis, which in the last two weeks has threatened to engulf bigger states such as Italy.

The new bailout would supplement a 110 billion euro ($156 billion) rescue plan for Greece launched in May last year. It is expected to include fresh emergency loans to Athens from euro zone governments and the International Monetary Fund, and a contribution by private sector investors.

Worried about the impact on financial markets and wary of angering their own taxpayers, euro zone governments have struggled for several weeks to agree on major aspects of the plan, especially the private sector contribution.

The euro rose moderately against the dollar in response to the Franco-German announcement, but markets may remain nervous until details are revealed. Providing fresh money to Greece and arranging for banks to participate could face legal and technical obstacles.

The head of the European Commission, Jose Manuel Barroso, warned on Wednesday that the global economy would suffer if Europe could not summon the political will to act decisively on Greece.

"Nobody should be under any illusion: the situation is very serious. It requires a response, otherwise the negative consequences will be felt in all corners of Europe and beyond," Barroso told a news conference.

(Writing by Andrew Torchia; Editing by Matthew Jones)

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Comments (4)
dfish wrote:
It’s not hard to understand Germany’s resistance. Tehy are the one’s who will be paying the majority of the bill and taking the risk while the others reap any benefits. Unless the others are willing to put up as much as Germany already has, it doesn’t make much sense for them to keep on bailing out Greece.

Jul 20, 2011 12:56pm EDT  --  Report as abuse
hariknaidu wrote:
It’s German Central Bank that’a against Euro Bonds because that’d explicitly underwrite current Euro Zone (17 states) as a transfer union – just like E Germany became after Union (1989). Tax payers are definitely against it led by CDU/FDP. Yet, for all practical reasons, the introduction of Euro (originally opposed by German CB)implicitly acknowledges it as a *transfer union* with ECB as its central monetary authority and independent of political interference. So the issue at hand is really the opposition of GCB (former economic adviser to Merkel who opposed the original bailout of Greece 15mths ago!) against Trichet and ECB. Germany can’t have its cake and also eat it!

Jul 20, 2011 3:18pm EDT  --  Report as abuse
breezinthru wrote:
This time, the impact should be felt by politicians and the banking/finance community who think the ordinary citizens of the world should be made to sacrifice anything and everything necessary to maintain the status quo for the privileged.

The Troika should consider holding their next meeting in France at Les Tuileries. It would provide great ambience and food for thought.

Is a system so prone to failure, mismanagement and cronyism really worth saving? Such fantastic wealth and power for so few and such stone-cold hardship for the common people who are made to pay the price for the reckless greed of the privileged!

Jul 20, 2011 6:40pm EDT  --  Report as abuse
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