• France's news in English

Euro crisis: France insists on debt deal

Matthew Warren · 2 Nov 2011, 08:44

Published: 02 Nov 2011 09:57 GMT+01:00
Updated: 02 Nov 2011 08:44 GMT+01:00

Facebook Twitter Google+ reddit

Greece plunged the eurozone back into crisis and markets into panic on Tuesday with a shock call for a referendum on a debt rescue package reached only with huge difficulty just last week.

Prime Minister George Papandreou's decision to hold a confidence vote on Friday and then a referendum on the debt deal stunned investors, angered EU leaders and left the eurozone back at square one, with Italy now under pressure just ahead of a high-profile Group of 20 summit in France.

The turmoil saw some European markets slump by 5 percent and more and pushed borrowing rates uncomfortably near record levels for Italy, which can ill afford to pay extra to raise funding given its strained finances.

French President Nicolas Sarkozy called Greece to order, insisting, in concert with Germany, that last week's accord was the only way to solve its debt problems.

Noting that the referendum call "surprised all of Europe," Sarkozy said "France reminds everyone that the accord adopted ... unanimously by the 17 member states ... is the sole possible way to resolve Greece's debt problems.

"Giving people a voice is always legitimate but the solidarity of all the eurozone countries is not possible unless each one agrees to measures deemed necessary," Sarkozy said.

France and Germany, he added, took the initiative to hold a meeting on Thursday before the opening of the G20 summit in Cannes, of all European institutions, the International Monetary Fund and the Greek prime minister to discuss "the conditions under which the engagements undertaken will be kept."

The White House meanwhile said the uncertainty caused by Greek's move showed the need for rapid implementation of the eurozone deal.

The announcement "just reinforces the notion that ... the Europeans ... need to elaborate further and implement rapidly the decisions they made last week," US President Barack Obama's spokesman Jay Carney said.

"It remains the case that the Europeans have the capacity to deal with this crisis and they need to implement the very important decisions they made last week to provide a conclusive resolution to it," Carney added.

The latest turn in the eurozone debt saga put Italy right back in the firing line, raising fears that it could follow Greece, Ireland and Portugal in needing a bailout and that the contagion could spread even further, to Spain.

Italian stocks closed down 6.8 percent with bank shares in free fall, in the worst session since the start of the global financial crisis in 2008.

Borrowing rates also shot up to well above 6 percent, coming close to levels that most believe cannot be sustained for the long-term.

In an effort to get ahead of the debt curve, Italian Prime Minister Silvio Berlusconi promised to take "rapid" action on economic reforms, long sought by his European partners, ahead of the G20 summit.

He told German Chancellor Angela Merkel that "the Italian government is determined to introduce the measures rapidly," his press office said.

Berlusconi had sought to ease market concern and pressure from Italy's eurozone partners last week with promises to increase the pension age, launch a privatisation programme and reform labour laws to make firing easier.

The prime minister, who returned to Rome early from a trip to Milan as markets dropped, was due to hold talks later on Tuesday with several ministers ahead of a possible cabinet meeting this week, ANSA news agency reported.

In a brief phone call to Merkel, Papandreou told the chancellor that the referendum would "strengthen the country in the eurozone and globally" but other leaders voiced frustration and annoyance that they had not been informed of his plan at last week's negotiations.

Commerzbank analyst Christoph Weil said many felt that the referendum call effectively left last week's accord dead in the water, with Greece facing default and even an exit from the eurozone.

"What will happen if people say 'No'? The risk is that the international community will turn off the supply of financing for Greece and the country will quit the euro."

If the vote is 'No,' it would scupper a deal to cut Greece's debt of more than €350 billion ($495 billion) by about €100 billion while recapitalizing the banks who will take a 50-percent loss on their holdings of Greek government debt.

The accord also includes controversial provisions to provide help for struggling eurozone states and looks forward to tighter economic and fiscal governance in the bloc, seen as vital for its future.

In a joint statement, EU president Herman Van Rompuy and European Commission president Jose Manuel Barroso said they had full trust in Greece to "honour the commitments undertaken."

In Greece itself, however, the government appeared headed for meltdown late Tuesday as Papandreou faced defections from his party and calls for the referendum to be scrapped.

Matthew Warren (news.france@thelocal.com)

Facebook Twitter Google+ reddit

Your comments about this article

Today's headlines
French MPs vote to make Airbnb 'professionals' pay tax
Photo: AFP

Do you make a lot of money through Airbnb in France? You'll have to pay a share to the taxman in future.

France and Britain accused of abandoning Calais minors
Photo: AFP

Scores of young migrants are forced to sleep rough for a second night.

France given wake up call as it bids for Brexit business
The business district 'La Defense' in Paris. Photo: AFP

France clearly has some work to do if it really wants to pinch business from the UK post-Brexit.

Mouth fun? French words you just can't translate literally
Do you know the French word for throat-support? Photo: AFP

Word of warning: Don't translate French literally.

How France plans to help its stressed-out police force
Yellow smoke rises around French police officers in Paris holding a banner reading "Solidarity with our colleagues, police angry". All photos: AFP

Could these measures stop the cops from protesting?

'3,000 migrants dispersed' after 'Jungle' clearance
Photo: AFP

While thousands of migrants have been bussed out around France, new ones are arriving all the time and thousands of others have simply been dispersed aid agencies say.

Fifteen of the most bizarre laws in France
Photo: Matthew Powell/Flickr

A must read for anyone who wants to stay on the right side of the law in France.

Medieval town in south of France upholds ban on UFOs
The town of Châteauneuf-du-Pape. Photo: Aa77zz/Flickr

Aliens take note.

American tourist dies at French Riviera sex club
The Riviera resort of Cannes. Photo: AFP

American tourist reportedly fell five floors after being pushed outside the underground sex club in Cannes.

Paris: 'Flying' water taxis to be tested on River Seine
Photo: SeaBubbles

An in Seine idea surely? But tests will go ahead.

The annoying questions only a half French, half Brit can answer
Sponsored Article
Last chance to vote absentee in the US elections
Forget Brangelina's chateau - here are nine others you've got to see
The must-see French films of the millennium - Part One
How life for expats in France has changed over the years
Why Toulouse is THE place to be in France right now
Video: New homage to Paris shows the 'real side' of city
The 'most dangerous' animals you can find in France
Swap London fogs for Paris frogs: France woos the Brits
Anger after presenter kisses woman's breasts on live TV
Is France finally set for a cold winter this year?
IN PICS: The story of the 'ghost Metro stations' of Paris
How to make France's 'most-loved' dish: Magret de Canard
Welcome to the flipside: 'I'm not living the dream in France'
Do the French really still eat frogs' legs?
French 'delicacies' foreigners really find hard to stomach
French are the 'world's most pessimistic' about the future
Why the French should not be gloomy about the future
This is the most useful French lesson you will ever have. How to get angry
Why is there a giant clitoris in a field in southern France?
French pastry wars: Pain au chocolat versus chocolatine
Countdown: The ten dishes the French love the most
Expats or immigrants in France: Is there a difference?
How the French reinvented dozens of English words
jobs available