Greece: Europe Tries to Contain the Economic Crisis

Aysegül Er writes for EA:

As the shock of the ongoing financial crisis in Greece spreads through almost all of Europe, tensions are rising. On Friday, Greek Prime Minister George Papandreou criticized the European Union's response to his country's financial requirements as timid and too slow. Papandreou claimed that EU institutions, the European Commission, member states, and the European Central Bank have failed to coordinate over the crisis and have undermined Greece’s credibility.

EU leaders maintain that Greece must take further measures to overcome its huge debts and should cut its budget deficit, which at 12.7 percent is four times higher than the upper limit set in the Eurozone, by 4 percent this year.


Papandreou said after the Brussels summit that his country was ready to take the extra action needed to reduce its deficit. “I think that political will is very clear,” he asserted, “Let us allow for the instrumentation to be something as a theoretical discussion, because we hope we will not be there because we are ready to take all the measures as well as Europe in order to be credible and to have a credible exit out of this crisis.”

EU ministers subsequently considered exceptional steps and coordinated action, if needed, to safeguard financial stability in the Euro-area. The EU Commissioner for Economic and Monetary Affairs Olli Rehn said, "Our view is that risks are materializing, and therefore there is a clear case for additional measures.” The European Commission approved the Greek austerity plan and agreed to work with the European Central Bank to monitor Athens.

Greek Finance Minister George Papaconstantinou denied that his country needed to take further austerity measures to cut its debt. He said, “My guess is that what will stop markets attacking Greece at the moment is a further more explicit message that makes operational what has been decided at the European Council." He pondered, “If we announce today new measures, will that stop markets attacking Greece?” but he then assured, “If additional fiscal measures are needed, we will take them.”

Europe Inside Line: A New Co-operation for France and Germany

New EA correspondent Aysegül Er offers this report on events in Europe:

On Thursday, French President Nicolas Sarkozy and German Chancellor Angela Merkel, meeting in Paris, put forth a ten-year blueprint for political and economical cooperation. The blueprint complements and extends a security cooperation which has been marked for 20 years by regular meetings of the Franco-German Defense and Security Council and an economic relationship in which bilateral trade reached €137.3 billion ($187 billion) in 2008.

The new cooperation covers diplomatic policy, security, defense coordination, economic and fiscal initiatives, environment protection, and biological diversity. Technological concerns also have emerged in initiatives such as a cross-border electro-mobility program for electric cars, joint bureaus dedicated to renewable energy, and aeronautic co-operation.



Sarkozy offered this explanation for the measures, "The financial crisis forced us to understand each other better ... Now we have decided to take it to another level." Sarkozy  added that France and Germany will contribute to the European Union’s common policy for improvement of economical conditions through this cooperation. A French official added that the two countries would extend their the cooperation to exchanges between companies as well as between employers and unions.

Merkel argued that developed countries should promote this type of co-operation by taking responsibility for sustainable growth, "We do everything to implement sustainable development and to include the principle of sustainability as a guideline of our common shares.”

Merkel and Sarkozy went beyond their countries to talk about budget stability of in the Euro-zone, mentioning debt crises in locations like Greece and Portugal. They argued that these countries should avoid such problems, both for the stability of their domestic situation and for the progress of the European economy.

The French and German leaders also announced a military step with the production of the A400M "transformed plane". The A400M is the first truly new military transport aircraft in more than 30 years, with twice the capacity and twice the payload of current models. It will be Europe’s biggest defense programme.