Speculators beware: The euro zone's biggest powers will back Greece through the debt crisis that has jeopardized all 16 nations in the common currency, French President Nicolas Sarkozy said Sunday.
Greek Prime Minister George Papandreou, in Paris as part of a four-city tour seeking firmer EU and U.S. support for new austerity measures to rein in its massive budget gap, received from Sarkozy the most outspoken support for his plans yet.
The French leader, coveting the chance to play the statesman with regional French elections to begin next Sunday, issued a warning to traders who would bet against the euro zone's willingness to defend a member state. And in a show of high-stakes poker with speculators, he purposely didn't detail what measures the bloc might take.
Papandreou's government has committed to a severe austerity plan to reduce Greece's massive 12.7 percent budget deficit, and has warned that going to the International Monetary Fund is an option if a European solution is not found.
"The Greek government ... took the measures asked of it. Euro zone states must now be ready to take theirs," Sarkozy told a news conference alongside Papandreou at the French presidential palace.
"Of course, the future of Greece is in question, but it's also that of Europe being played out," Sarkozy said. "Europeans have created a common currency — all the countries that share this currency must show solidarity."
Sarkozy, who along with German Chancellor Angela Merkel is seeking to calm markets and bring down Greece's high borrowing costs, didn't spell out any specific ideas.
"Concrete, precise methods exist — ones we don't need to communicate about tonight, certainly not," he said. "But they will allow us — when the time comes — to show that Greece isn't just supported politically but supported in all the aspects of its eventual requests."
French Finance Minister Christine Lagarde is working with her European counterparts, the European Central Bank and the EU's executive Commission "on a certain number of precise measures," Sarkozy said.
"If Greece needs them (the measures), we'll be there," he said. "Speculators ... must know that 'solidarity' means something."
France, Germany and Greece will take a common initiative to fight speculation, and the euro zone's two biggest economic powers "have decided to do what's necessary so that Greece is not isolated," Sarkozy said.
Papandreou insisted he's not looking for money, but the ability to raise money in the debt market on the same interest-rate terms as those in other European countries. Because Greece's national debt is considered more risky in the market, Athens must pay high interest rates to lenders — and that in turn hampers its ability to pay down its debt.
"What we ask is for an intervention so we can borrow," he said, without specifying.
Papandreou also suggested the euro-zone should consider creating a "European Monetary Fund" that could support a member in times of crisis, though he acknowledged that such a move would require changing EU treaties.
After the news conference with Sarkozy, Papandreou told reporters that Germany, France, Greece and the informal eurogroup would in coming days detail how they plan to deal with credit default swaps on sovereign debt — the forms of insurance against a borrower defaulting on its obligations.
The need for Greece to seek help from the IMF has now receded, Papandreou said, but added that the option was still open. He said talks are under way in the EU toward finding a mechanism that would allow Greece to reduce its borrowing costs, though he did not specify.
Papandreou's stop in Paris was the third of a four-stop swing aimed to drum up support for measures announced last week that cut civil servants' pay, froze pensions and hiked fuel, alcohol, sales and other taxes.
He left Paris Sunday for Washington, where he was scheduled to meet Monday with Secretary of State Hillary Clinton and President Barack Obama on Tuesday. On Friday, he visited Luxembourg and Berlin.
Papandreou's Socialist party came to power in October and shocked Europe by quickly revising the government's budget deficit to 12.7 percent of gross domestic product for 2009 from below 4 percent earlier that year.
"The situation we inherited was worse than our worst nightmare," Papandreou said in a statement to a Greek newspaper.
Sarkozy is seen as far more sympathetic to Greece's problems than Merkel. The French leader spoke for about 45 minutes Sunday with Merkel before meeting with Papandreou.
The austerity plan, approved by Greece's Parliament on Friday, has sparked strikes and violent demonstrations. Protesters clashed with riot police in central Athens and a new general strike has been called for Thursday, on top of another planned for March 16.
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