Greek, German ministers kick off euro diplomacy

[August 20, 2012]  BERLIN (AP) -- Greece's foreign minister meets his German counterpart Monday at the start of a new high-stakes round of financial diplomacy that could help determine the future of the 17 countries that use the euro.

Germany's Guido Westerwelle is hosting Greece's Dimitris Avramopoulos ahead of a meeting in Berlin on Friday between their countries' leaders, Chancellor Angela Merkel and new Prime Minister Antonis Samaras. Both Merkel and Samaras also meet this week with French President Francois Hollande, the leader of Europe's second-biggest economy after Germany.

The 17-country eurozone is awaiting a report next month on Greece's progress in implementing reforms and austerity measures demanded in exchange for two massive bailout packages. The report is being compiled by the so-called "troika" -- representatives of the European Union, European Central Bank and International Monetary Fund.

Signs of that Greece might be slipping on its commitments have fueled impatience with Athens in Germany and other prosperous nations -- as well as speculation about a possible Greek exit from the 17-nation euro. Should the report find that Greece has not been meeting its bailout commitments, the country could face the prospect of having its funding cut off. This would force the country into a chaotic default on its debts and eventually out of the eurozone -- a move that would further destabilize the currency bloc.

German officials and lawmakers are making clear they have no appetite for granting Greece more time to comply with the terms of its rescue packages or other concessions.

The German weekly Der Spiegel reported this weekend that an initial assessment by debt inspectors suggests Greece may need to cover a financing shortfall of up to (EURO)14 billion over the next two years, rather than the (EURO)11.5 billion Athens has identified. It did not cite sources.

Finance Minister Wolfgang Schaeuble said on Saturday: "I have always said that we can help the Greeks, but we cannot responsibly throw money into a bottomless pit." The parliamentary leader of Merkel's conservative bloc, Volker Kauder, has insisted that there is no room for giving Greece more time and says he sees little chance of Germany's governing coalition supporting a third rescue package.

Germany's vice chancellor, Economy Minister Philipp Roesler, said recently the idea of Greece leaving the euro has "lost its horror." A regional official with one of the country's governing parties, Bavarian state finance minister Markus Soeder, has called for Greece to leave the currency this year and argued that "an example must be made of Athens" -- comments Westerwelle has criticized.

In an interview published Monday by Germany's Berliner Zeitung and Frankfurter Rundschau newspapers, top European Central Bank official Joerg Asmussen said that he wants Greece to remain in the eurozone and that "securing that is in the hands of Greece."

"A withdrawal by Greece would be manageable," Asmussen, a German, was quoted as saying. But "a withdrawal would not be as orderly as some imagine. It would be connected with lower growth and higher unemployment, and very expensive. In Greece, in the whole of Europe and in Germany too."

"I am always astonished about the flippancy with which some speculate about a withdrawal and the contempt with which inhabitants of the common European house are spoken about," he added.

The ECB has said that it may buy government bonds to drive high borrowing rates down if countries first ask for help from Europe's bailout funds -- a move that would benefit countries such as Spain and Italy.

Asmussen said that program "will be better conceived" than the ECB's previous bond-buying program, launched in 2010 but long dormant.

[Associated Press; By GEIR MOULSON]

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