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Common ground

June 17, 2011

The German and French leaders say they have found common ground on the Greek economic crisis, and urged Greece to continue with its ambitious reform and austerity program.

French President Nicolas Sarkozy (r) looks at German Chancellor Angela Merkel
Merkel and Sarkozy say their nations are on the same pageImage: AP

The German and French leaders emerged from a meeting in Berlin on Friday with a common message on helping the ailing Greek economy. The pair called for a swift solution to the country's debt crisis, which threatens the stability of the euro single currency.

German Chancellor Angela Merkel and French President Nicolas Sarkozy said Greece would need a second bailout package to buttress a 110 billion euro ($157 billion) bailout agreed last year. The issue of a second aid deal, expected to be worth around 80 billion euros to 120 billion euros, has divided eurozone members, with the two leaders saying they had reached a "breakthrough" on the matter and that time was of the essence.

"Germany and France are determined at the upcoming EU summit ... to say that we want a quick solution," Merkel said at a joint news conference in Berlin.

Private sector involvement

The leaders also stated that private sector involvement in a second bailout should be on a voluntary basis and be conducted in coordination with the European Central Bank, the European Commission and the International Monetary Fund.

Greek Prime Minister George Papandreou
Papandreou has suffered a massive drop in supportImage: AP

"I want to stress this: There is no legal basis so far for there being obligatory involvement," Merkel told reporters after the talks.

Coming into the meeting, France had opposed German demands that private lenders such as banks and insurance companies be prepared to accept losses arising from their loans to Greece. Paris, meanwhile, feared private losses would spread to other parts of the eurozone.

Merkel also applauded reform and austerity measures being pursued by the Greek government of Prime Minister George Papandreou which have led to a widespread drop in support for the Socialists.

Political moves

Earlier Friday, Papandreou announced wholesale changes to his cabinet in a bid to address the fall in popularity as he attempted to push through the widely unpopular reform program.

Shortly after his appointment, the new finance minister, Evangelos Venizelos, vowed to back the austerity measures as part of his plan to "carry out a real war" on the country's debt crisis.

Greeks protesting
The reform measures are not popular among GreeksImage: AP

The Greek Socialists' reform plan involves 28 billion euros worth of new taxes and spending cuts, and a privatization of state assets worth around 50 billion euros.

The proposals sparked violent clashes between protesters and riot police in the Greek capital, Athens, earlier this week.

European Commission President Jose Manuel Barroso said on Friday in Brussels that he hoped "the new government can be approved rapidly, so that the process for continuation of financial assistance to Greece may continue smoothly."

Despite the unpopularity of the reform measures in Greece, Barroso remained confident that "leaders in Greece and Europe will rise to the challenge and act with responsibility."

"I call on all political forces to put all their energy in securing broad political support of economic reform that Greece needs," Barroso added. "It is a reform for the benefit of the people and for the benefit of Greece."

Support for the euro

Barroso said economic stability in Greece was tied to economic stability in Europe as a whole.

Merkel reiterated her support for the euro and said Germany's prosperity was dependent on its future stability. Germany and France were determined to defend the common currency, Merkel told reporters, saying "we will do everything to preserve and support the euro."

The talks precede a two-day EU summit called for next Thursday to address Greece's debt woes, which have destabilized the euro single currency and sent jitters through markets around the world.

Author: Darren Mara, Matt Zuvela (Reuters, dpa, AFP)
Editor: Sean Sinico