Relieved Europe hints at more time for Greece

Mon Jun 18, 2012 12:38pm EDT
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By Stephen Brown and Dina Kyriakidou

BERLIN/ATHENS (Reuters) - Euro zone paymaster Germany, relieved at a narrow election victory for Greece's pro-bailout parties, signaled on Monday it may be willing to grant Athens more time to meet its fiscal targets to avert a catastrophic euro exit.

But financial markets' relief that the 17-nation European currency area had avoided plunging deeper into crisis was quickly overtaken by concern about unresolved problems in Greece, the lack of a comprehensive plan for the euro zone as a whole and weakness in the world economy.

As leaders of the G20 major global economies began a summit in Los Cabos, Mexico, a G20 source told Reuters their draft communiqué would say that Europe will take "all necessary policy measures" to ensure that the euro zone is stable and intact. It also urged the Europeans to find ways to break the dangerous "feedback loop" between indebted governments and weak banks.

German Foreign Minister Guido Westerwelle said the substance of Greece's austerity and economic reform programme, agreed in exchange for a second EU/IMF rescue, was non-negotiable, but the timing of its deficit reduction goals might be adjusted.

"We're ready to talk about the timeframe as we can't ignore the lost weeks and we don't want people to suffer because of that," Westerwelle said in a radio interview.

Government officials said his comments did not reflect Berlin's official position, and a government spokesman said now was not the time to give Greece "a discount".

However, Deputy Finance Minister Steffen Kampeter, who is closer to Chancellor Angela Merkel and normally a stickler for strict adherence to fiscal orthodoxy, told ARD television: "It is clear to us that Greece should not be over-strained."

Austrian Chancellor Werner Faymann said Greece needed both a sustainable course of fiscal consolidation and a return to economic growth after four years of recession.   Continued...

A protester holds fake money next to a wall of sandbags built during a protest against financial speculations in front of Frankfurt's stock exchange June 17, 2012. REUTERS/Alex Domanski