Leading members of the international banking community descended on Berlin Wednesday for a meeting aimed at convincing Germany to send a financial rescue package to debt-stricken Greece.
Germany is being asked to contribute 8.4 billion euros ($11 billion) as part of a 45 billion euro aid package from the European Union and the IMF (International Monetary Fund). However, German Chancellor Angela Merkel is hesitant to go against popular opinion in Germany and release the funds unless Greece puts up a concrete plan to rein in its finances.
Merkel also discussed the widening eurozone crisis with US President Barack Obama by telephone Wednesday evening. According to a White House statement, the two leaders "discussed the importance of resolute action by Greece and timely support from the IMF and Europe to address Greece's economic difficulties."
Clock is ticking
While Germany is still waiting on a solid proposal from Athens, heads of international banking organizations are urging Berlin to pick up the pace.
"Every day that is lost, the situation is getting worse and worse," said Dominique Strauss-Kahn, managing director of the IMF. "Not only for Greece, but for the whole eurozone, and perhaps also for other regions."
"There is an absolute necessity to decide very rapidly," added ECB head Jean-Claude Trichet.
Although Chancellor Merkel is still putting the impetus on Greece to fulfill the conditions of a financial aid package, she conceded that time was of the essence as Greece's debt crisis spreads to other European countries and drags down the euro.
On Wednesday, international credit agency Standard & Poor's downgraded Spain's credit rating, and the euro reached a one-year low against the dollar.
"It's very clear that negotiations between the Greek government, the European Commission and the International Monetary Fund must be accelerated," Merkel said at a press conference with Strauss-Kahn.
"We hope they can be wrapped up in the coming days, and based on this, Germany will make its decisions."
She added that the original decision in 2000 to allow Greece into the eurozone may have "not been checked thoroughly enough."
Stricter rules needed
Axel Weber, head of the German Federal Bank, the Bundesbank, told Thursday's edition of the German daily Bild that the present crisis demonstrated the need for a significant reform in the EU's financial regulations.
"The German taxpayer profits from a stable euro, and we have to protect that," he told the paper, justifying Germany's contribution to the proposed bail-out of Greece. "But to make sure this remains an absolute exception and that in the future things don't reach this stage in the first place, we have to significantly tighten the rules in the EU."
Weber admitted that Greece's behavior in the past and the current situation was a heavy burden for the euro. "Helping Greece is currently the best method for making sure the crisis does not spread to other member states," he said.
The Bundesbank chief also added that talk of expelling Greece from the eurozone was useless, since shutting a country out would be legally impossible.
In order for Germany to send money to Greece, both houses of the German parliament must sign off on the deal. Several German ministers and members of parliament took part in Wednesday's meetings.
Citing information from a meeting with the IMF's Dominique Strauss-Kahn, Juergen Trittin, parliamentary leader of the Green party, said the total package for Greece could be as high as 120 billion euros over three years.
Thomas Oppermann, a senior parliamentary leader of the Social Democrats, said Germany's contribution would not be less than 25 billion euros - about three times the current estimate of 8.4 billion euros. Strauss-Kahn declined to comment on the figures.
The decision puts Chancellor Merkel in a political bind as a key regional election approaches on May 9. Contributing to a rescue package for Greece is widely unpopular in Germany.
Editor: Susan Houlton