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Greek exit must be averted ‘at all cost’

Greece's exit from the eurozone risks causing an "unpredictable" spread of the debt crisis, a scenario which France will work to avoid at all cost, French Finance Minister Pierre Moscovici said Tuesday.

“Everything must be done to help pro-European and pro-euro forces in Greece,” ahead of repeat elections due next month, Moscovici told AFP, citing “measures to boost growth and give back hope to the Greek people”.

Moscovici was also confident that Paris and Berlin would find compromises on a string of French proposals to revive economic growth in Europe even though both capitals currently disagree on eurobonds.

“Compromises are possible, notably on boosting the capital of the European Investment Bank, the mobilisation of unused structural funds and the creation of a European tax on financial transactions,” he said after talks Monday with German counterpart Wolfgang Schaüble in Berlin.

Moscovici said he and Schaüble had found “a common language” to face the current crisis.

“Wolfgang Schaüble’s talk was very positive,” he said on the plane back to Paris.

However Moscovici still cited “major disagreement” between Paris and Berlin on eurobonds, which would allow embattled governments to borrow from financial markets more easily by having their debt guaranteed by fellow EU members.

German Chancellor Angela Merkel has adopted a hard line against eurobonds, arguing that Germany – Europe’s largest economy and the state with the lowest borrowing costs – would pick up the tab if eurozone debt were pooled.

With new elections looming in Greece on June 17 and Spain’s crippling recession showing no sign of abating, the eurozone crisis dominated the talks between Schaüble and his new French counterpart.

“We agreed that we have to do everything to keep Greece in the euro club,” Schaüble told a joint press conference.

“We both believe that Greece has its place in the eurozone,” Moscovici said, adding that “the commitments undertaken had to be respected” in reference to reforms demanded in return for huge bailout packages.

Europe has to support investment and economic growth in Greece “at a time when it is going through a violent recession”, the French minister added.

The pair sought to present a united front ahead of a summit of EU leaders on Wednesday in Brussels, after a weekend G8 meeting left Berlin looking increasingly isolated with its austerity-driven solution to the crisis.

Moscovici said that new French President Francois Hollande, who last week met Merkel just hours after his inauguration, wanted to “put everything on the table, even topics that not everyone agreed on.”

Eurobonds are a “strong idea,” he said.

He stressed Europe had to come up with concrete results by a June summit.

Schaüble said Germany “would participate in all constructive ideas to strengthen sustainable growth” but cautioned that budgetary consolidation was “a necessary precondition.”

Moscovici also insisted that France would play its part in reducing its own budget deficits, pledging: “The commitments made by President François Hollande during his campaign on public finances will be kept to.”

France aims to reduce its deficit to below the EU limit of three percent of gross domestic product by next year and balance its budget by 2017.

In a reminder that the crisis was not limited to Greece, Spanish Economy Minister Luis de Guindos predicted that his country’s economy, already mired in recession with record-high unemployment, would shrink again in the second quarter.

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