Papandreou Sees ‘New Will’ in EU to Manage Crises (Update1)
March 10, 2010, 12:16 PM EST(Adds comments on swaps oversight plan in third to final paragraphs.)
By Rebecca Christie
March 10 (Bloomberg) -- Greek Prime Minister George Papandreou said he sees a “new will” in the European Union to deal with fiscal crises and indicated EU leaders soon will draft a plan to increase oversight of credit-default swaps.
Speaking today in Washington, he said Greece is asking for market access to borrow at “sustainable” rates, not seeking a bailout.
“We would like to borrow at more normal rates or lower rates,” Papandreou said. While investor demand was strong for Greek debt in the government’s recent sale, the country had to borrow at rates that would be harmful if they persisted, he said.
Papandreou said the financial oversight plan is a collaboration with German President Angela Merkel, French President Nicolas Sarkozy and Luxembourg Prime Minister Jean- Claude Juncker, who heads the group of euro-area finance ministers. It will describe “some of the questions and the problems we see” with derivatives and financial speculation and task the European Commission for recommendations, he said.
One element of the proposal may be mandatory reporting of derivative trading and portfolio activity to a European trade repository, he said. The proposals could be added to European law or be a basis for collaboration with the Group of 20 developing and industrial nations, Papandreou said. Details may be available later this week, he said.
Speculators
Papandreou said financial regulation should be strengthened to prevent market manipulation so that Greece’s austerity program can succeed. Speculators shouldn’t be allowed to make deals that are the equivalent of “insuring your neighbor’s house for fire and then sort of hoping that it’ll burn down so that you get the money,” Papandreou said.
“We wouldn’t want Greece to be bet against or people with quite a bit of power in the market to be wanting to see Greece’s failure,” he said.
Papandreou and his delegation are in Washington this week to seek U.S. support for more transatlantic cooperation on financial market supervision. After talks yesterday with President Barack Obama, Papandreou said he got a “positive response” of support from Obama for Greece’s measures to deal with its budget crisis.
Papandreou spoke today at a briefing with reporters at the Center for American Progress, a think tank headed by John Podesta, the co-chairman of Obama’s transition team after the 2008 presidential election.
IMF’s Role
Papandreou said European leaders want to keep the International Monetary Fund as a last resort for countries in crisis, preferring instead to develop tools for addressing crisis within Europe. The IMF is offering Greece monitoring and technical advice, not loans.
“As I see it today, I see that Europe is mustering its strength and its will to want to avoid this, even though this may just be a theoretical possibility,” Papandreou said. A proposed European Monetary Fund is a long-term option, along with development of tools for providing assistance on a case-by- case basis, he said.
Greek officials are trying to convince investors they can cut the nation’s budget deficit, which at 12.7 percent of gross domestic product was the EU’s largest in 2009 and more than four times the 27-nation bloc’s limit.
Papandreou earlier this month announced a package of tax increases and spending cuts that helped the government sell 5 billion euros ($6.8 billion) of bonds. The Mediterranean country faces more than 20 billion euros in debt redemptions in April and May.
--Editors: Brendan Murray, Carlos Torres
To contact the reporter on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net;
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
