News Column

Merkel Backs Greece Staying in Eurozone

Oct. 15, 2012

German Chancellor Angela Merkel said Monday she wanted Greece to remain in the eurozone and pressed Athens to reduce its fiscal deficit.

Her remarks came after Finance Minister Wolfgang Schaeuble said at a news conference in Singapore at the weekend than he did not expect Greece to default.

"We want Greece to remain in the eurozone, but the work has not been finished, and there is a whole lot to do in the next weeks," Merkel told reporters during a news conference at her office.

She added that everything being done was to "avoid the world economy entering a state of shock."

Despite the upbeat response on financial markets to Merkel's and Schaeuble's remarks, a spokeswoman for the finance minister in Berlin discounted reports that Schaeuble had effectively guaranteed that there would be no sovereign default by Athens.

"In substance it's nothing new," she said, adding a decision on whether to okay the next 31.5-billion-euro (40.8-billion-dollar) installment of aid depended on Greece's progress in reducing deficits.

The International Monetary Fund, the European Central Bank and the European Commission - known as the troika - are drawing up a report on Greece's progress in cutting fiscal deficits.

Greece is negotiating a new package of cuts and reforms with the troika in exchange for releasing more bailout funds.It is pushing for leaner cuts and more time to implement reforms to secure a return to growth after five years of recession and rising unemployment.

Troika inspectors are expected to finalize a report on Greece's progress ahead of a summit of European Union leaders on October 18.

"Decisions will be made after the troika report (is handed in)," the finance ministry spokeswoman said.

In Athens, Greek Finance Minister Yannis Stournaras ruled out a breakthrough in negotiations with the country's creditors before the EU summit.

The eurozone blue-chip Stoxx 50 rose 1.25 per cent to 2500 in early morning trading after Merkel's remarks. It later settled back to 2,469, a gain of just 0.4 per cent since Friday.

In Bangkok, Schaeuble hailed progress to end the sovereign debt crisis, saying, "We are winning back confidence step by step."

Speaking after an Asia-Europe meeting of finance ministers, he said, "Our colleagues see that we are on track."

Asked if his remarks ruling out a Greek default amounted to a guarantee for Greece, Merkel told reporters in Berlin: "There are great fears on other continents, in Asia ... that there will be uncontrolled processes in the eurozone.

"On this, the German finance minister said - and I see it exactly as he does - that there will not be any uncontrolled processes," she continued. "That does not of course subtract from the fact that we are still waiting for the troika report and that we will draw our conclusions then."

Source: Copyright 2012 dpa Deutsche Presse-Agentur GmbH

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