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Greek report Greek report
by Euro Reporter
2011-09-28 07:17:46
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Greece urges Turkey to be calm on Cyprus drilling

The Greek prime minister spoke to his Turkish counterpart on Monday, calling for calm in a dispute over gas exploration off Cyprus that has widened the island’s Greek-Turkish divide and added to tension between Turkey and Israel. Turkey, which backs a breakaway Turkish Cypriot state in northern Cyprus, has challenged the right of Cyprus and Israel to drill in an area believed to hold the world’s biggest gas find of the past decade. Turkish Prime Minister Tayyip Erdogan last week called the drilling “madness”.

Both Cyprus and Turkey had exploration vessels off southern Cyprus on Monday as the Greek and Turkish leaders discussed the situation, a day before peace talks on the divided island were set to resume. “The prime minister said there should be self-restraint and calm,” Greek government spokesman Ilias Mosialos told reporters after a phone conversation between George Papandreou and Erdogan. “Unilateral actions that create problems in the region should be avoided”, Mosialos quoted Papandreou as saying.

An official from Erdogan’s office said Erdogan had told Papandreou it would be better if gas exploration and extraction took place after a peace settlement had been reached on the island, and said unilateral actions could harm negotiations. The two discussed holding a high-level meeting on Cyprus, possibly between end-October and mid-November. They had been due to meet at last week’s U.N. general assembly in New York but Papandreou stayed in Athens because of the debt crisis. Greece, whose relations with fellow NATO member Turkey have warmed in the past decade after a long history of enmity, is not directly involved in the gas exploration. But it is a close ally of Greek Cyprus, a fellow European Union member and the divided island’s internationally recognised authority.


Greece pressured on austerity

The Greek government began a race for parliamentary approval of a stepped-up austerity package vital to keep the debt-laden country afloat and buy time for Europe to approve new rescue measures. Greek officials said the IMF was seeking written commitments on its latest austerity promises before sending inspectors back probably this week to conclude a review of compliance with a €110 billion bailout programme. Greece has repeatedly missed its deficit reduction targets. IMF and EU approval is essential to release an €8 billion emergency loan that, without which, public salaries, pensions and other bills will go unpaid in October.

Public anger over ever more belt-tightening remains high and there is increasingly open talk in Europe and beyond of a likely Greek default and a far larger haircut for investors. Greek bank shares fell by more than six per cent to a 19-year low today on media reports of a larger than planned haircut. "Every time such a scenario is heard, bank stocks are hurt. It would mean substantial capital requirements for banks," said Natasha Roumantzi, an analyst at Piraeus Securities. Police fired tear gas at protesters on Sunday night outside parliament in the first such unrest after a summer lull, while unions have launched a fresh round of strikes and protests.

Austrian finance minister Maria Fekter said a debt cut for Greece, with compulsory write-downs for investors, was an option of last resort. German chancellor Angela Merkel said yesterday default was not an option because it would destroy investors' confidence in Europe. German deputy finance minister Joerg Asmussen said euro zone finance ministers would probably not be ready to decide on releasing the aid instalment at their next meeting on October 3rd, which could trigger a cliff-hanger that could unsettle markets.


Greece will always be in Eurozone; no default

Finance Minister Evangelos Venizelos appeared confident in New York on Saturday -- a day before his meeting with IMF Managing Director Christine Lagarde -- over the battered Greek state's finances, predicting that an EC-ECB-IMF delegation will soon return to Athens and that the sixth tranche of a bailout package will be disbursed as scheduled. Venizelos, who also holds a deputy premier's portfolio in the Greek government, again emphasised that Athens will also dutifully meet obligations stemming from the July 21 Eurozone decisions.

In driving home the point, the Greek minister said the clear message from his meetings with Eurozone and third country counterparts on the sidelines of the annual IMF summit in Washington D.C. are that "Greece is and will always be part of the euro, a member of the Eurozone." Among others, he met with the German, French, Italian and Belgian finance ministers.

"We are now answering the negative stereotypes that have been circulating internationally about Greece, now that we are taking significant and harsh decisions, now that the Greek people are subjected to new sacrifices ... A series of events will follow: the (EC-ECB-IMF) 'troika' will return; the sixth tranche is disbursed; July's decisions are implemented, thereby allowing us to reach a truly viable long-term debt within the implementation of the July 21 decisions. This plan is clear and it exists. We must do everything so that no one can pin the blame on us," he said. Beyond the commitments to Eurozone partners, Venizelos repeated the still unresolved problems still plaguing the country, such as large "grey economy", tax evasion, statism and low competitiveness. On Sunday, beyond the meeting with Lagarde, Venizelos will meet in Washington with Institute for International Finance (IIF) executives, IMF officials and possibly with ECB President Jean Claude Trichet and European Union Commissioner Olli Rehn.

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