EU buying time for deal
Prime Minister George Papandreou is due to travel to Brussels on Thursday for talks with European Council President Herman Van Rompuy after he announced that the European Union leaders? summit, which is likely to decide on a more comprehensive solution to the debt problems faced by Greece and the eurozone, has been delayed for a few days.
Van Rompuy said the leaders will meet on October 23, thereby giving more time to France and Germany, which are leading the efforts to draw up a new package that would likely propose holders of Greek debt accepting a larger writedown than suggested in July.
?This timing will allow us to finalize our comprehensive strategy on the euro area sovereign debt crisis,? said Van Rompuy.
Greece favors the option of expanding the Private Sector Involvement (PSI) scheme, which had proposed bondholders accepting a 21 percent haircut on a voluntary basis. Finance Minister Evangelos Venizelos Monday referred to this as a ?PSI Plus? option. However, there is growing concern in Athens that Germany believes the only solution is for Greece to force investors to accept a 50 percent haircut, effectively leading the country to bankruptcy.
German government spokesman Steffen Seibert remained tight-lipped on what options Berlin is considering.
?The German and French governments are convinced this will be a contribution to the eurozone winning back confidence and its capacity to act — and I do mean a contribution, not the miracle cure everyone keeps asking for.?
Asked if only Germany and France were involved in drawing up the plans, Seibert said he believed both Merkel and Sarkozy were in ?constant contact with other European partners.?
Responding to a question about whether Greece in particular would be consulted in the details of the plan, Seibert said it would involve ?measures for the eurozone as a whole and the stability of our currency overall, not measures for one single country.?
Speaking to the European Parliament Monday, Germany?s new representative at the European Central Bank, Joerg Asmussen, said that the eurozone had to come up with a new deal that would make Greece?s public finances sustainable but which would also create a firewall to protect European banks from contagion. Asmussen said it was too early to assess how big a revised haircut might be.
