Europe should help Greece, French PM says

European nations should do everything possible to help Greece avoid a default despite concerns about whether Athens is a reliable borrower, Frances prime minister said Friday, fueling hopes that a bailout could be agreed next week.

Tensions between Athens and other European capitals hit new highs this week as eurozone ministers delayed to Monday a decision on a bailout agreement and demanded more commitments from Greece. Seven people were detained Friday following an anti-austerity protest in which eggs were thrown at the German embassy in central Athens.

French Prime Minister Francois Fillon took Greece’s side, warning that the fallout of letting the country go up in financial flames would be far-reaching.

”We must do absolutely everything so that there is not a default by Greece, which would be dramatic for Greeks themselves and dramatic for Europeans,” he said on RTL radio Friday.

Now that the Greek Parliament has approved austerity measures imposed by international creditors and banks have agreed to help in the bailout, Fillon said, ”the Europeans must now honor their commitments. That is the position that France is defending.” Some European politicians have downplayed the effects of such a debt default by Greece, but Fillon called that ”totally irresponsible.” Eurozone finance ministers are due to meet in Brussels on Monday to decide on the bailout. Hopes that they will clear the €130 billion ($169 billion) bailout deal as well as a related bondholders’ writedown pushed markets higher on Friday. The euro rose 0.4 percent and stock markets rose across the board.

Greek Prime Minister Lucas Papademos spoke Friday with the leaders of Italy, Germany and the Netherlands to discuss the latest developments. Papademos’ office said he held a conference call with German Chancellor Angela Merkel and Italian Premier Mario Monti before a separate conversation on the telephone with Dutch Prime Minister Mark Rutte.

Rutte later tweeted that he told Papademos ”that the Greeks must meet all the demands for a new (bailout) program.” The Netherlands, one of the richest countries in the eurozone, together with Germany and Finland has been tough on Greek politicians in recent weeks, questioning their determination to stick to the terms of the new rescue.

Martin Kotthaus, a spokesman for the German finance ministry, said Friday ”We are getting closer and closer to a solid basis for decisions for Monday.” However, he also noted several issues still needed to be resolved, among which making sure the new aid program brings Greeces debt down to a sustainable level and establishing tighter control over Athens’ spending decisions.

Germany and several other countries want Greece to set up a form of escrow account — separate from the main government budget — that would give priority to servicing Greeces debt over spending on government services.

The European Commission, the EUs executive that is in charge of economic monitoring, is currently working on several options for such an escrow account, which will be discussed at a meeting of eurozone finance ministry officials on Sunday. The final set-up of the account will have to be decided by the ministers on Monday.

An EU official said that, among several options, the Commission is looking at a ”transit account” through which Greeces bailout money would be funneled. The account would have a ”hierarchy of payments,” with servicing the country’s debt at the very top, the official said. He was speaking on condition of anonymity because the details of the plan are still in flux.

The official said there was ”a critical mass” of euro countries in favor of such an account. He also said Greece was not in a position to challenge the creation of such an account. ”It’s part of it (the bailout deal) as long as some delegations want it to be,” he added.

Resentment has been mounting in Greece over what many see as the humiliation of the country and the hardship brought on by increasing demands from the country’s creditors that have left the country in a fifth year of recession.

German Finance Minister Wolfgang Schaeuble in particular rankled Greeks when he urged the country to postpone its general elections, tentatively set for April, to make sure the current government has time to implement reforms.

The comments were seen as an inadmissible intrusion into a sovereign country’s politics and fueled outrage within the halls of power in Athens and across the media.

Greek President Karolos Papoulias shot back: ”Who is Mr. Schaeuble to disparage Greece? Who are the Dutch? Who are the Finns? We always had the pride to defend not just our freedom, not just our country, but the freedom of Europe,” he said.

That in turn further angered Berlin, whose backing is crucial for any agreement on Greek debt.

”We cannot accept such criticism of Germany and the German negotiators,” German Foreign Minister Guido Westerwelle said.

Though Frances premier backed Greeces right to get its bailout without further delays, Fillon on Friday offered blunt criticism of the rioters in Athens, who on Sunday torched dozens of buildings to protest against new austerity measures.

The Greek measures ”by the way, are not much bigger than what the Portuguese, Spanish or Italians are doing, and they are not burning down their capitals,” Fillon said.

[AP] – Ekathimerini.com