Debt woes
October 21, 2011
"Europe is moving resolutely towards an economic government of the eurozone," French Prime Minister Francois Fillon told business executives at a seminar in Seoul, South Korea, on Friday, in a bid to dispel fears that the eurozone debt crisis will persist.
Fillon said an emergency EU summit, planned for Sunday, would be a "moment of truth" for the bloc as it pushes for transparency and fiscal governance to prevent the Greek debt crisis from spreading.
"Today Europe is faced with a new challenge. As she has always done in the past, she will overcome the tests and emerge strengthened," Fillon stressed.
However, deep rifts between France and Germany - the eurozone's two strongest economies - over how to solve the debt crisis have forced the 17-nation zone to call a fresh summit next Wednesday - even before the "decisive" Sunday talks.
"We have made enormous progress but not enough to take final decisions on [Sunday]," said Steffen Seibert, spokesman for Chancellor Angela Merkel.
Rating angst
The major dispute is over how to extend the European Financial Stability Facility (EFSF), a 440-billion-euro ($600 billion) bailout fund designed to stave off future solvency crises among the countries that use the euro.
France and Germany disagree over how to leverage the facility, with Paris fearing its AAA credit rating could come under threat if the wrong method is chosen.
Failure to agree on leveraging the EFSF will further damage confidence in the eurozone's ability to tackle its debt crisis after nearly two years of trying to get on top of a problem that started in Greece and now threatens Italy, Spain and even France.
Underlining the threat the eurozone crisis poses to the broader global economy, US President Barack Obama held a video conference with Merkel and French President Nicolas Sarkozy late Thursday, reiterating hopes that a solution would be agreed on before a G20 summit in early November.
Merkel and Sarkozy "fully understand the urgency of the issues in the eurozone and are working diligently to develop a comprehensive solution that addresses the challenge and which will be politically sustainable," said a White House statement.
Payment for Greece approved
One thing that has been agreed by eurozone finance ministers is that the next tranche of the bailout for Greece will be paid out.
"We have agreed to endorse the disbursement of the next tranche of financial assistance to Greece in the context of the current economic adjustment programme," said a statement from the Eurogroup.
The 8-billion euro payment is expected to be approved by the International Monetary Fund at the beginning of November. After that, the money can be paid out.
While Europe's leaders rush to stop the debt crisis in Greece from infecting other countries in the eurozone, ordinary Greeks continue to rage at the prospect of further budget cuts agreed to in return for more help from international lenders.
Athens was in the grips of violent protests Thursday as the country's international creditors forced a second parliamentary vote on further harsh austerity measures. The Greek parliament approved the package with a wide majority despite violence on the streets that broke out after some 35,000 protesters had gathered.
Police reportedly fired tear gas at hooded youths near Athens' central Syntagma Square after the assailants began attacking demonstrating unionists. Combatants wielding batons donned motorcycle helmets and attacked each other.
The violence marked the second day of unrest in the city. At least 45 people were injured after protesters clashed with riot police on Wednesday, with stores, banks and hotels vandalized and cars torched. One man reportedly died of his injuries.
Author: Gabriel Borrud, Nicole Goebel (AFP, Reuters)
Editor: Martin Kuebler