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EU tries to keep meeting leaks from harming Greece

EU tries to keep meeting leaks from harming Greece

May 8th, 2011 by GABRIELE STEINHAUSER and DEMETRIS NELLAS, Associated Press in News

BRUSSELS (AP) - European officials scrambled Saturday to keep leaks of a secret meeting of the region's financial heavyweights from exacerbating Greece's already dire economic situation.

"This was not a 'crisis meeting on Greece,"' Amadeu Altafaj Tadio, spokesman of EU's Monetary Affairs Commissioner Olli Rehn, said of the gathering that took place Friday in Luxembourg, stressing that "there have been informal meetings with different compositions before, and there will be in the future."

The meeting was to be kept secret at the request of the host, Luxembourg Prime Minister Jean-Claude Juncker, according to a Greek government spokesman. But it added to growing concerns over Greece, which despite being granted 110 billion (about $160 billion) in rescue loans from other eurozone countries and the International Monetary Fund remains stuck in recession.

A statement from Juncker's office early Saturday said Greek Finance Minister George Papaconstantinou had been invited to join the finance ministers of France, Germany, Italy and Spain as well as the EU's Rehn and European Central Bank President Jean-Claude Trichet after his country "had been the subject of extensive discussions" at a recent IMF meeting.

The gathering was an informal stocktaking, in no ways meant to be decisive, officials stressed, denying any talks of a potential debt restructuring for Greece, and even more vehemently rejecting a report from the German online magazine Spiegel that the country was seeking to exit the eurozone.

"Were it not for the absolutely ridiculous claims by a German magazine about Greece supposedly asking to exit the euro, this meeting would not have attracted any attention," Papaconstantinou told reporters in Athens Saturday afternoon.

He said the meetings Juncker calls with eurozone members "are informal and that is why they are not announced."

"The Greek government is taking all decisions and will continue taking all decisions necessary to bring this process to a successful completion," the minister said. "We are well aware that markets continue to doubt and we need to work as hard as necessary to convince them that we will achieve results."

Papaconstantinou said Greece was working on "our next steps for 2012 and 2013, so that Greece can either go back to the markets or use the recent decision of the European Commission, which gives the ability to the European fund to buy Greek bonds."

Yet the meeting came at an ominous time. One year ago, on the very same weekend in May, the eurozone's top financial officials patched together a 750 billion bailout fund in the hope of stemming the crisis that was rocking their common currency after the rescue loans given to Greece a few days earlier failed to do just that.

And the situation does not look much better now. Leaked news of the meeting, paired with the report of Greece abandoning the euro, sent the common currency tumbling to its lowest level in weeks, signaling the uncertainty that remains on financial markets.

Trading on European debt markets had already stopped by the time the news of the meeting hit, but the yield, or interest rate, on Greece's two-year bonds still closed above 25 percent Friday, more than 22 percentage points above equivalent German bonds. The high risk premium shows how few investors believe that Greece will be able to stand on its own feet again in 2013, when the bailout loans run out.

Papaconstantinou himself acknowledged those fears earlier this week, when he called on the eurozone and the IMF to give Greece more time to repay and further lower the interest rates on its rescue loans - after the loan terms were already eased in March.

Yet, extending more help to Athens may be more difficult now than it was a year ago, with other crises in Ireland and Portugal. Political divisions within the eurozone have been growing in recent months, likely one of the reasons why Friday's meeting was limited to a few core-participants.

A political standoff in Finland, where a euro-skeptic, anti-bailout party may join the new government, has blocked progress on the currency union's crisis strategy in recent weeks, since most decisions have to be taken unanimously.


Demetris Nellas contributed from Athens.