Countries hold intensive talks

EUROZONE countries held intensive talks on yesterday on a possible rescue for Greece, whose debt crisis has shaken the entire currency union, as civil servants staged the first big strike against Athens’ austerity plans.

Financial markets gave Greece some respite as investors hoped that other European governments would help Athens to head off a possible default on its debt repayments.

Finance ministers of the 16 countries that share the common European currency scheduled a video conference for Wednesday to discuss the issue, a European Commission spokesman said.

However, EU law offers no clear procedure for staging the first bailout of a eurozone country in the currency’s 11-year history.

One possibility was for individual countries to offer bilateral aid and Germany, one of the few whose finances are in anything like a fit state to do so, might take a leading role. This could sidestep rules which restrict financial rescues at an EU or eurozone level.

In Berlin, sources in the coalition government said a deal on which countries would help Greece, and by how much, could be reached on the sidelines of an EU leaders’ summit on Thursday.

Athens needs to borrow about €53 billion this year to cover a huge budget deficit and refinance debt which is coming due. But investors have taken fright over the risks involved in buying Greek bonds, and the government could slide towards default if they boycott future debt auctions.

Germany and France would probably bear the lion’s share of any aid, since Italy and Spain, the other two big economies in the eurozone, are themselves under financial pressure.

So far, officials across European capitals seem to have decided little apart from the likely need to offer a financial lifeline to the Greek government, which is sitting on debts forecast to hit €294bn this year.

In Berlin talks were under way both within the centre-right coalition and with other eurozone governments.

“It has not yet been conclusively decided,” said one person who attended a meeting with German conservatives and Finance Minister Wolfgang Schaeuble.

Greece accounts for only a small percentage of eurozone output.However, news that its budget deficit had spiralled to 12.7% of gross domestic product last year, more than twice the announced level, dented investors’ confidence across the currency union and beyond.