French president Nicolas Sarkozy is to hold urgent talks in Germany with chancellor Angela Merkel on speeding up the rescue plan for the euro. Sarkozy said on Friday the talks would take place within days as uncertainty about the eurozone's stability and worries about deepening recession returned to European markets. Declaring after talks with Greek premier George Papandreou that "a failure of Greece would be a failure for all of Europe", the French president praised Athens for its determination to meet its commitments and said: "There can be no question of dropping Greece." His comments came as European leaders turned up the heat on Slovakia to approve the enhanced eurozone rescue fund amid growing fears it could yet scupper the scheme. Only a day after huge relief at Germany's decision to endorse the expanded bailout fund, anxiety stalked markets and the corridors of power as eurozone inflation rose to a three-year high of 3%, shares in French banks plunged as much as 10% and Denmark's central bank offered 400bn krone (£46bn) in emergency liquidity for the country's banks. There was renewed talk of a Greek debt default and larger "haircuts" for private bondholders as Papandreou sought backing for a further €8bn (£6.8bn) lifeline to save his country's treasury from bankruptcy. Sarkozy said: "There is a moral and economic obligation of solidarity with Greece." Papandreou in turn told reporters that his nation was making all the required sacrifices and reforms. "I wish to make it perfectly clear that Greece, I myself, our government, the Greek people, are determined to make the necessary changes." Yet conflict sprang up anew over plans to set up an even bigger rescue fund for the eurozone, with leading European bankers demanding an outline agreement on a new scheme by the time G20 finance ministers meet in mid-October.
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Saturday, October 1, 2011
French president Nicolas Sarkozy is to hold urgent talks in Germany with chancellor Angela Merkel on speeding up the rescue plan for the euro. Sarkozy said on Friday the talks would take place within days as uncertainty about the eurozone's stability and worries about deepening recession returned to European markets. Declaring after talks with Greek premier George Papandreou that "a failure of Greece would be a failure for all of Europe", the French president praised Athens for its determination to meet its commitments and said: "There can be no question of dropping Greece." His comments came as European leaders turned up the heat on Slovakia to approve the enhanced eurozone rescue fund amid growing fears it could yet scupper the scheme. Only a day after huge relief at Germany's decision to endorse the expanded bailout fund, anxiety stalked markets and the corridors of power as eurozone inflation rose to a three-year high of 3%, shares in French banks plunged as much as 10% and Denmark's central bank offered 400bn krone (£46bn) in emergency liquidity for the country's banks. There was renewed talk of a Greek debt default and larger "haircuts" for private bondholders as Papandreou sought backing for a further €8bn (£6.8bn) lifeline to save his country's treasury from bankruptcy. Sarkozy said: "There is a moral and economic obligation of solidarity with Greece." Papandreou in turn told reporters that his nation was making all the required sacrifices and reforms. "I wish to make it perfectly clear that Greece, I myself, our government, the Greek people, are determined to make the necessary changes." Yet conflict sprang up anew over plans to set up an even bigger rescue fund for the eurozone, with leading European bankers demanding an outline agreement on a new scheme by the time G20 finance ministers meet in mid-October.
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Plans to strengthen the firepower of the eurozone's bail-out fund may be put in jeopardy by Slovakia, where a coalition stalemate is prompting the government to consider asking for a special derogation.
Last in line to vote, Slovakia's parliament is supposed to pass two pieces of legislation - one agreeing the framework of the new fund and a second piece that would formally raise Bratislava's guarantees from €4.4 billion to €7.7 billion.
However, the junior ruling coalition party Freedom and Solidarity remain steadfastly opposed to raising the country's contribution, depriving the centre-right Christian Union party of Prime Minister Iveta Radicova of the necessary threshold of votes.
According to sources in Bratislava, the government is now looking to see if it can secure a formal declaration on its contribution, understood to mean that Slovakia's money would be ring-fenced.
Slovakia's EU commissioner Maros Sefcovic, currently on a trip to his home country, said he was "convinced" that that the solution being considered by the government would be "hardly acceptable for our partners".
The enhanced fund, whose new rules would allow it to buy the debt of eurozone countries, capitalise troubled banks and give pre-emptive credit lines to governments, needs to be approved by all 17 eurozone states.
Slovakia, where political debate has focussed on the justification for per capita poorer Slovaks bailing out richer Greeks, emerged almost immediately as the country likely to have the most profound problems.
The Slovak debate is likely to make markets even more sceptical about the eurozone's political willingness to take all necessary measures to save the single currency.
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