Darling: Greek government must solve financial crisis

The Greek government must take prime responsibility for resolving the country’s deep financial crisis, British Chancellor Alastair Darling said today.

The Greek government must take prime responsibility for resolving the country’s deep financial crisis, British Chancellor Alastair Darling said today.

After talks in Brussels where Greece was given a month to show economic and social reforms are working, he said everyone had an interest in seeing a stable single currency.

However, he made clear it remained a problem for the “euro zone” member states - the 16 countries who share the common currency – and not for EU members who had not adopted the euro.

British Prime Minister Gordon Brown made the same point at a summit last week at which euro zone countries agreed to support Greece “if needed” in return for Greek austerity measures designed to reduce huge Greek debt and deficit figures.

At today’s talks, Greek finance minister Georges Papaconstantinou insisted he was on track to get a deficit of 12.7% of GDP down to 3% by 2012, including a 4% reduction this year alone.

The maximum deficit allowed under single currency stability rules is 3% and no euro zone member has breached the figure by such a margin before.

The result has been a slump in the euro and the risk of “contagion” in other countries already struggling in the downturn, including Ireland, Spain and Portugal.

Mr Papaconstantinou said Greece would apply the necessary remedies – even though few believed the country could manage the targets.

He must now report back to finance ministers in a month – and has promised to step up austerity measures if he cannot show that existing moves on public sector jobs and pay, health and education reforms, and radical tax changes, are beginning to work.

Mr Darling, on the sidelines of the talks as British Chancellor of a non-eurozone nation, commented afterwards: “It is first and foremost a matter for the Greek government to resolve. It must implement plans to reduce its deficit.

“But we all have an interest in stability in Greece. That’s why I strongly welcome the evaluation by the European Commission and the European Central Bank - with important technical assistance being provided by the International Monetary Fund, which has the experience to play an important supportive role.

“We will review this work at our next meeting in March, including the further measures the Greek government has agreed to take.”

Mr Darling added: “I also welcome the euro area’s determination to take coordinated action, if needed, to safeguard financial stability in their area.”

The meeting was an opportunity for a first encounter between Mr Darling and former French minister Michel Barnier since Mr Barnier was appointed EU Commissioner responsible for the internal EU market and financial services.

The British Chancellor has invited him to London, not least to appease critics who say the Frenchman is now in charge of setting heavy EU regulations which could damage the City of London’s reputation as Europe’s leading financial centre.

French President Nicolas Sarkozy described Mr Barnier’s appointment as a victory for France and described the UK government as “losers” in the battle to secure top EU jobs.

But Mr Barnier has sidestepped the row, insisting he is not likely to impose French-style heavy regulation and will act independently as a Commissioner, in the interests of Europe as a whole, including the City of London.

Last month he said it was in the interests of the European financial sector and of the British financial sector to be regulated properly and effectively.

But he added: “I’m not going to be taking orders from Paris, London or anywhere else. I can give a cast-iron guarantee.”

Mr Darling said today: “We had a constructive discussion on financial regulatory reform, including on proposals for a levy on systemically important financial institutions.

“This was also an opportunity to meet with Commissioner Barnier for the first time since his confirmation. I look forward to welcoming him to London next month to continue our discussions on how we make Europe’s single market in financial services, with London at its heart, a stronger and safer one.”

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