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France and Germany will strive over the next four weeks to stop Greece from unsettling markets as officials work to put the country’s faltering bailout plan back on the rails, French Finance Minister Pierre Moscovici said.
Moscovici made his comments at a joint press conference in Berlin today with his German counterpart, Wolfgang Schaeuble, as their deputies entered a second day of negotiations in Brussels to lay the groundwork for a Greece-related conference call tomorrow. The working group “is making good progress step by step in the difficult question of Greece,” Schaeuble said.
“I just want to underline that we continue to seek a comprehensive solution during the month of November, to end the uncertainty,” Moscovici said. “And we will marshal all of our forces for that.” Germany and France are equally determined “that Greece stays in the euro zone, and that Greece makes the necessary efforts to ensure the integrity of the euro zone.”
Euro-area finance chiefs are readying for talks as the 17- nation bloc grapples over ways to fill Greece’s financing gap and ease investor concerns that it might have to exit from the euro. Ministers are due to hold a conference call at 12:30 p.m. tomorrow, then a Nov. 12 meeting in Brussels, with a possible special gathering slated for Nov. 8.
In Greece, politicians are still haggling over the measures needed to clinch a new bailout agreement. While Prime Minister Antonis Samaras said that negotiations over the budget have been completed and the package will be presented to parliament tomorrow, the Democratic Left party supporting his coalition reiterated its opposition to proposed labor reforms. Democratic Left’s economic policy spokesman said Oct. 25 the party will vote for the budget.
European policy makers are preparing their opening gambits on Greece as the so-called troika of the European Commission, the European Central Bank and the International Monetary Fund compiles its latest report on Greece’s progress in meeting internationally agreed targets that are a prerequisite for the next instalment of a 130 billion-euro ($168 billion) rescue.
“The discussions are continuing, including with the troika,” Moscovici said. He declined to comment on details.
IMF chief Christine Lagarde is due to meet with German Chancellor Angela Merkel in Berlin today as officials try to work out a plan that will cut Greek debt to 120 percent of gross domestic product by 2020 from about 144 percent now amid the worst recession in a generation. Failure to hit the debt target could see the IMF withdraw aid, sparking another wave of speculation about Greece’s future in the euro.
“It’s yet another standoff between Athens and its creditors,” Nicholas Spiro of Spiro Sovereign Strategy in London said in an e-mail.
Merkel and Lagarde are due to brief reporters at about 6:30 p.m. together with the heads of the World Bank, the Organization for Economic Cooperation and Development, the World Trade Organization and the International Labor Organization.
OECD Secretary General Angel Gurria said in a Bloomberg Television interview that the international organization heads discussed competitiveness, jobs and productivity for three hours with French President Francois Hollande in Paris yesterday.
Moscovici reiterated French calls for debt mutualization for the “very long term” as part of moves to restore investor faith in the euro region.
“We are not talking about euro bonds anymore,” he said in Berlin. “I know that it is a red line here in Germany.”
“We are working on a common financial policy and to the degree that we have a common fiscal policy, we can have more intelligent debt management,” Schaeuble said. “When we have a common financial policy, then we can issue joint debt to that degree. That’s clear.” Without a common financial policy, there can be no euro bonds, he said.
European stocks and the euro gained today, with the single currency rising 0.5 percent to $1.2963 as of 3:28 p.m. in Berlin. The Stoxx Europe 600 Index (SXXP) gained 0.75 percent.
Merkel’s government, as the biggest country contributor to Greece’s two bailouts, has signalled that it is willing to consider an ECB proposal for a buyback of Greek debt. Schaeuble, who cast doubt on the proposal earlier this month, said in an Oct. 28 radio interview that a buyback “is worth serious discussion.”
At the same time, German officials said Greece shouldn’t expect other euro-area nations to renegotiate the loans they’ve already given the country.
German news magazine Der Spiegel reported in this week’s edition that the troika proposes a debt restructuring for Greece that would require public-sector lenders to take heavy losses. Greece already carried out the biggest write-off of privately held debt in history. An interim troika report was distributed to the German government last week, Schaeuble said.
“There is no consensus right now,” said Carsten Brzeski, a senior economist at ING Group in Brussels. “I still think that some kind of debt forgiveness will happen in the future but I don’t see it happening right now.”
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