23/Apr/2014 - Last News Update: 15:02

Greece: Merkel and Sarkozy urge bail-out

Category: Business

Published: 17th Jun 2011 13:28:50

The leaders of Germany and France have said that they want a new rescue package for debt-laden Greece to be agreed as soon as possible.

But Angela Merkel and Nicolas Sarkozy said any private sector involvement should be "voluntary" not compulsory.

They were speaking after Greece's Prime Minister, George Papandreou, appointed a new finance minister.

Evangelos Venizelos joined the cabinet as part of a reshuffle aimed at pushing through budget cuts.

It was unclear under what terms private investors might voluntarily take part in a Greek bail-out.

But the comments by Mrs Merkel and Mr Sarkozy were seen as a signal to banks and bondholders that they will not be made incur losses on Greek debt.

Germany and France had been at odds over whether private investors should be forced to share a greater burden to resolve Greece's debt crisis.

There were calls in Germany that investors should allow Greece extra time to pay off debts and should be made to participate in future fundraising by the Athens government.

Mrs Merkel is facing a backlash domestically over Germany's huge financial contribution to European bail-outs.

France's big three banks - Credit Agricole, BNP Paribas and Societe Generale - are heavily exposed to the Greek economy.

This week, ratings agency Moody's warned it may downgrade the three French banks because of their exposure to Greece.

After a meeting between Mrs Merkel and Mr Sarkozy in Berlin, the leaders said they were agreed on any private sector participation.

They stressed that a "voluntary" extension of maturities of Greek government bonds held by private investors should be part of that solution in order to ensure market stability.

"There are worries that we want to cause a credit event," Mrs Merkel said. "We do not want that. This is about a voluntary participation."

Rating agencies and the European Central Bank had warned that imposing a rescheduling of Greek debt on bondholders would count as a "credit event" - a partial default by Greece - sending panic through financial markets and intensifying problems in Portugal, the Irish Republic and Spain.

Last Updated at 14:00

Marketwatch ticker

Data delayed by 15 mins

The announcement from France and Germany eased tensions in financial markets.

Europe's main bourses initially extended their week-long falls on Friday and were down 1% in mid-morning trading.

But by midday, the share indexes in UK, France and Germany were back in positive territory. The futures indexes for Wall Street indicated that US markets will open higher.

A Spanish bond auction underlined the fears of contagion from the Greek crisis, with investors demanding a higher rate of return.

Although appetite for the issue was strong, the average rate demanded for the 15-year bonds was a euro-era high for Spain of just over 6%.

The yield on Spanish 10-year bonds is near an 11-year high, trading on the secondary market on Friday at 5.64%, just off the rate's peak of 5.70% on Thursday.

New finance minister Evangelos Venizelos will take over from George Papaconstantinou, a move that sparked a jump in Greek bank shares.

Although shares in Greek companies rose, with bank stocks up 4% at one stage, analysts were divided over whether the cabinet reshuffle would restore confidence.

Mr Papandreou wants to impose political stability as Greece awaits approval for the next tranche of bail-out money.

The European Union's top financial official, Olli Rehn, has indicated that Greece is likely to get its next round of funds in July if Mr Papandreou's government can pass new budget cuts and privatisations before the end of the month.

Greece needs a 12bn-euro loan to avoid defaulting on its debts due for repayment over the next few months.

Source:
BBC News External Link Show Citation

Latest News

Harvard Citation

BBC News, 2011. Greece: Merkel and Sarkozy urge bail-out [Online] (Updated 17th Jun 2011)
Available at: http://www.ukwirednews.com/news/163033/Greece-Merkel-and-Sarkozy-urge-bail-out [Accessed 23rd Apr 2014]

News In Other Categories

  • Plan to abolish corroboration put on hold by Scottish government

    Controversial plans to end the need for evidence in Scottish criminal trials to come from two sources have been delayed by the government.
  • Bristol Academy extends reach overseas with first foreign students

    With the doors to its brand new £1million training centre officially open, one of the UK's leading apprentice training providers, Bristol based S&B Automotive Academy, is showcasing its world-class facilities by launching a series of foreign student exchanges for the first time in its 41-year history. To get a flavour of what life is like as an apprentice in the UK, the Academy hosted 16 apprentice engineers and bus drivers from the G9 Automotive College in Hamburg, Germany, as part of a Europe-wide vocational training initiative called the ‘Leonardo Programme’ with support from the European Social Fund. In a reciprocal arrangement, S&B will be sending nine apprentices to Germany during February 2012 so that they can get an appreciation of life in the automotive industry on the Continent. A further three German exchange groups are being planned for next year. Designed to assist the development of vocational skills and training across Europe, including work placements for trainees, the Leonardo Programme has a budget of €1.75bn, which is helping to encourage UK organisations to work with their counterparts abroad. In what is expected to be another challenging year for employers in the UK automotive sector, S&B’s Chief Executive, Jon Winter, claims that the exchange initiative will bring many benefits to the Academy and its apprentices: “In a world of global automotive brands, it’s important for our learners to understand the international context of the industry they have chosen to make their career. This new exchange programme will enable apprentices and Academy staff alike to achieve a better understanding of the challenges and opportunities within the automotive arena in Europe. With the Academy’s influence also extending to the USA and Asia, there’s every possibility that this initiative could move further afield in the future.” Continued Winter: “The need for skilled technicians across the world is on the increase and we actively encourage our apprentices to look at broader horizons during their training. Many of them have already learned the phrase ‘Vorsprung durch Gelehrtheit’, quite simply, ‘Advancement through learning.” In the 2010/11 academic year, S&B doubled the number of successful Apprenticeships over the previous year with some 350 apprentices graduating from the Academy. At the same time, achievement levels reached an all-time high with an overall success rate of 85%. For those learners on the Advanced Apprenticeship three-year programme, success rates were even higher, at over 98%. PHOTO CAPTION: As part of their exchange visit, S&B Automotive Academy arranged for the German apprentices to visit Hampshire bus operator, Bluestar, at its Barton Park depot. The students are pictured with S&B’s Andy West (3rd right) and Steve Prewett, Bluestar’s Area Engineering Manager (2nd right). Ends http://www.sandbaa.com
  • NHS Central Eastern Commissioning Support Unit in CCG services talks

    A body supporting NHS groups in the eastern region has warned it could cease to operate in its "current form".
  • Twaddell Avenue camp: Three in court over flag incident

    Three people have appeared in court charged in connection with an incident at a loyalist protest camp in north Belfast.
  • Football Association hit by drop in broadcast money

    The Football Association was hit by a £34m drop in broadcasting rights income last season compared with 2011-12.
  • Max Clifford jury gets majority direction

    Jurors in the indecent assault trial of publicist Max Clifford have been told they can return a majority verdict.