Merkel: Germany wants 'strong Greece' in eurozone

By Juergen Baetz

Associated Press

Published: Tuesday, Sept. 27 2011 2:35 p.m. MDT

German Chancellor Angela Merkel, left, and the Prime Minister of Greece, Georgios Papandreou, right, shake hands prior to a dinner at the chancellery in Berlin, Germany, Tuesday, Sept. 27, 2011.

dapd, AP Photo/Oliver Lang

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BERLIN — German Chancellor Angela Merkel pledged on Tuesday to offer Greece "all necessary assistance" in overcoming its debt crisis, but said the Greek government must fully implement all its planned austerity measures.

"Through the euro, we are closely bound together, and the weakness of one affects us all," Merkel said at a news conference with Greek Prime Minister George Papandreou.

Their meeting was being closely watched by financial markets in the hope they were preparing a comprehensive solution to the European debt crisis, but neither Merkel or Papandreou announced any new measures ahead of their private dinner at Berlin's chancellery on Tuesday evening.

Germany, Europe's biggest economy, is seen as a key player in resolving the 17-nation euro zone's debt crisis, but Merkel's government has repeatedly been accused over the past 18 months of being a reluctant leader of the rescue efforts. Speaking alongside her Economy Minister Philip Roesler earlier Tuesday, Merkel reiterated her conviction that there is no quick solution, saying the crisis must be dealt with "step by step."

Greece must receive an €8 billion ($11 billion) rescue loan before mid-October to stave off bankruptcy, a collapse that would send shock waves through markets around the world. But creditors have demanded more efforts to raise revenue.

In response, Greek lawmakers approved a controversial new property tax Tuesday evening, passing it 154-143 in the 300-member parliament.

Greek Finance Minister Evangelos Venizelos said his country will get the money. "The disbursement will be decided in time, in line with the course of our funding needs," he said.

Speaking over chants from protesting ministry employees and tax office workers outside his department in Athens, Venizelos said Greece had made great efforts to achieve its fiscal targets, but that a "hyper-effort" is necessary to fully meet its commitments.

Venizelos said representatives from the International Monetary Fund, the European Commission and the European Central Bank will return to Athens this week. The so-called troika suspended its review in early September amid talk of missed targets and budget shortfalls.

"We want a strong Greece within the eurozone, and Germany is prepared to offer all necessary assistance," Merkel said.

Papandreou, in return, pledged to implement the reforms demanded by Greece's international creditors, adding that "we hope that we can manage a primary budget surplus already in 2012." Speaking through a translator, he said: "Those are times of great sacrifices for the Greek people. Therefore it is of great importance to receive signals of support from our European partners."

Earlier Tuesday, Papandreou told a meeting of German business leaders that "we are borrowing to repay."

The current plan is to have Greece implement painful debt-reduction measures in exchange for rescue loans. Greece relies on funds from last year's €110 billion ($149 billion) package, and European leaders also have agreed on a second €109 billion bailout, although some details of that remain to be worked out.

Ahead of Tuesday's meeting between the two leaders in Berlin, Merkel's government downplayed speculation of bold new moves to tackle Europe's sprawling sovereign debt crisis.

There has been growing speculation in the markets that Greece's bailout creditors will look to impose bigger losses on Greece's private bondholders as well as recapitalize Europe's banks and boost the size of the eurozone's rescue fund. Talk of such a comprehensive package has helped turn sentiment around in stock markets this week following last week's turmoil.

So far, there's been no confirmation from Europe's capitals that such a comprehensive solution is being planned.

German Finance Minister Wolfgang Schaeuble ruled out increasing the eurozone's new €440 billion ($595 billion) rescue fund, calling it "a silly idea" that could ultimately endanger the AAA rating of the main creditor countries such as Germany or the Netherlands.

The Greek government recently announced new austerity measures, including pension cuts and tax increases.

Tuesday's new property tax will be calculated on a sliding scale, depending on the size of the property, its age and location. The tax will be charged through electricity bills to make it easier for the state to collect, instead of going through Greece's unwieldy and inefficient tax system. Those who refuse to pay will risk having their power cut off.

But the extra charge has deeply angered Greeks, who have already been through more than a year of sharp austerity measures that have seen salary and pension cuts and increased taxes across the board. State electricity company unionists have threatened not to collect the tax.

Greeks have been outraged by such measures, and unions have responded with strikes and protests. Public transport workers walked off the job Tuesday for two days, and were to be joined by taxi drivers on Wednesday. Tax office and customs workers also were on strike.

Police briefly scuffled with protesters outside parliament shortly after Tuesday's vote there and used pepper spray to disperse one group of youths.

Elena Becatoros and Derek Gatopulos in Athens contributed.

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