Europe

Europe

Merkel, Sarkozy reach deal on Greek debt - no details

21 July 2011 04:11 (UTC +04:00)

Baku-APA. French President Nicolas Sarkozy and German Chancellor Angela Merkel reached an agreement on a second bailout for Greece, German government spokesman Steffen Seibert said early Thursday, APA reports quoting monstersandcritics.com website.

Details would be released later Thursday, Seibert said.

The resolution of differences between the eurozone’s largest economies smooths the way for Thursday’s summit meeting of the currency area’s leaders in Brussels to potentially hammer out a deal in hopes of shoring up the reeling Greek economy, which has unnerved markets about the health of the rest of the eurozone.

The French and German leaders had already been meeting for two hours late Wednesday when European Central Bank President Jean-Claude Trichet unexpectedly arrived and joined the talks, which continued for another two hours until around midnight.

Merkel has advocated that private lenders be required to take part in the new Greek bailout package. Sarkozy and Trichet have argued that private participation must be voluntary to avoid the perception of a partial default on debt.

Greece, which received an EU-IMF bailout of 110 billion euros last year, needs a second loan agreement to meet its payments beyond 2012.

Credit rating agencies have warned that forcing losses on bond-holders - even with their agreement - would lead them to declare a selective default for Greece.

Merkel and Sarkozy agreed to the last-minute meeting on Tuesday, ahead of Thursday’s eurozone summit in Brussels - which is aimed at solving Greece’s ongoing debt crisis and restoring market conference.

’Germany and France must agree. If this does not happen, Europe cannot advance,’ said Seibert said earlier.

The midnight agreement following growing rancour between Paris and Berlin.

Hours before leaving to face Merkel, Sarkozy was quoted by a French newspaper accusing Germany of ’criminal’ levels of ’selfishness’ in its approach to the Greek debt crisis.

The two leaders did not address the press during their Berlin meeting.

Pressure had been mounting ahead of Thursday’s summit for concerted action on the Greek problem.

In Brussels, European Commission President Jose Manuel Barroso had urged leaders to put national interests aside and take concrete steps.

’The euro is one of our greatest assets. Its benefits far outweigh the effort that is required by the member states on the different sides of the negotiation,’ he said. ’We cannot be light about this, or else history will judge this generation of leaders harshly.’

Three Brussels-based economists said in a paper published Wednesday that the value of outstanding Greek debt must be reduced by at least 165 billion dollars.

Benedicta Marzinotto, Jean Pisani-Ferry and Guntram B Wolff of the Bruegel think tank wrote that any ’viable solution’ to the euro crisis should involve cutting Greek debt obligations ’by at least one third.’

On Tuesday, the International Monetary Fund (IMF) called for ’more Europe, not less,’ to swiftly resolve the eurozone debt crisis, while US President Barack Obama said a resolution was crucial to sustain Europe’s economic recovery, in a telephone conversation with Merkel.

The heads of state of the 17-nation eurozone are to attend Thursday’s summit, along with IMF chief Christine Lagarde and Trichet.

Earlier, French Finance Minister Francois Baroin told France Info radio that the summit would send a ’strong message’ about Europe’s commitment to guaranteeing the stability of the single currency, adding that ’two or three simple ideas’ would likely emerge.

These would include a more flexible approach to the maturities and interest rates of the debt contracted by Greece and other vulnerable economies, and expanding the use of the European Financial Stability Fund, Baroin said.

Eurozone officials are also considering a tax on banks, although this would take time to implement and there are concerns about making all banks pay, including those that did not lend to Greece.