'France and Germany to help Greece raise money'

Greece's Prime Minister George Papandreou attends a parliament session in Athens on Friday. The worst fears on Greece's economy have been confirmed, Papandreou told parliament on Friday after a visit of EU inspectors. (Reuters)

By AGENCIES

Published: Feb 28, 2010 12:13 AM Updated: Feb 28, 2010 12:13 AM

ATHENS: Germany and France have agreed to help Greece sell bonds in return for stronger efforts by Athens to slash its budget deficit, Greek newspaper Ta Nea reported on Saturday, citing unnamed sources.

The Greek Finance Ministry declined to comment on the report, which came after growing signs that diplomatic efforts were underway to resolve Greece's debt crisis.

Germany's state-owned development bank KfW will buy Greek government bonds or provide guarantees for other banks to buy them, said Ta Nea, a major newspaper, quoting unnamed banking sources and officials close to Germany's finance minister.

France's state-owned bank Caisse des Depots will also be involved in the aid, Ta Nea reported, adding that French President Nicolas Sarkozy had discussed this by telephone with Greek Prime Minister George Papandreou.

In return, the Greek government has agreed to introduce additional austerity measures worth some 4 billion euros ($5.4 billion) to reach its target of cutting the budget deficit by 4 percentage points this year, the newspaper said.

Sources in Germany's ruling coalition told Reuters earlier this month that the coalition was considering having KfW buy Greek bonds as a way to resolve Greece's debt crisis, which has caused turmoil in European debt markets and undermined confidence in the euro currency.

European Union inspectors visited Athens this week to discuss the crisis. EU Economic Affairs Commissioner Olli Rehn plans to visit Athens next week, and Ta Nea said Rehn would announce the aid plan for Greece during his visit.

Papandreou said on Friday that he would visit Berlin for talks with German Chancellor Angela Merkel on March 5, while Deutsche Bank Chief Executive Josef Ackermann met Papandreou in Athens on Friday.

Media reports in Germany and France have suggested governments in the 16-country euro zone might offer aid worth 20 billion to 25 billion euros to Greece, but officials have declined to comment on the size of any aid plan.

Greece, which is preparing to tap the euro debt market with its second bond issue this year, has said its funding needs are met until mid-March, and it will need to refinance about 20 billion euros of debt maturing in April and May. The debt market has been worrying that Greece may not be able to borrow at affordable rates.

Meanwhile, just over half of Greeks consider the government is handling the economic crisis in an effective manner, but many more are unhappy with rising unemployment, a poll published on Saturday showed.

Some 52.3 percent of Greeks consider the government has got to grips with the crisis, a poll by Tothepoint polling agency published by Ta Nea newspaper showed.

But the poll also pointed to discontent as 70.9 percent said the government's policy on unemployment was not good.

Greece's unadjusted unemployment rate jumped to 10.6 percent in November from 7.8 percent a year earlier, reaching its highest level in nearly five years.

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