Greek PM to meet Obama for talks

International ‘impotence’

In a speech to the Brookings Institution in the US capital on Monday, Papandreou urged the Group of 20 (G20) leading industrial nations to take the lead in efforts to rein in market speculators which Greece blames for its financial plight.

Papandreou warned that failing to do so could trigger another global financial crisis.

He said: “We need clear rules on shorts, naked shorts and credit default swaps.

“I hope there will be a positive response from this side of the Atlantic to bring this initiative to the G20.”

He warned that the crisis could cause a domino effect, driving up borrowing costs for other countries with large deficits.

“If the European crisis metastasises, it could create a new global financial crisis with implications as grave as the US-originated crisis two years ago,” he said.

Papandreou, who noted he was born in Minnesota and raised in California, deplored the fact that the international community seemed “impotent” in dealing with complex, inter-related markets and urged the US to join Europe in a co-ordinated bid to bring order to them.

He has previously said that he will seek US support for moves against speculators when he meets Obama on Tuesday.

European IMF

Following three rounds of austerity measures, Papandreou is adamant that his government has done all it can to reduce its massive 12.7 per cent budget deficit.

His actions have brought a series of strikes in Greece, with the latest on Monday seeing Greek tax collectors staging a two-day walkout.

Sarkozy promised Greece that eurozone states would help it overcome its crisis [AFP]

Court workers also launched a week-long series of two-hour work stoppages and rubbish collectors also announced strikes.

The Greek prime minister is now seeking pledges of support from other nations that will reassure markets and lower the debt-stricken country’s hefty borrowing costs.

He has said unless his new austerity plan receives the full backing of markets and its European partners, he could be forced to seek help from the International Monetary Fund (IMF).

That is something Nicolas Sarkozy, the French president, is thought to be against because the IMF is run by Dominique Strauss-Kahn, his political rival.

Instead, members of the eurozone have discussed creating a “European IMF”.

Angela Merkel, the German chancellor, said on Monday that she backed the idea of a European Monetary Fund in principle, although a number of details would have to be cleared up before anything was agreed.

She also said she did not rule out taking action if Greece got into an “emergency situation” but that this was not the case at the moment.

Precise measures

On Sunday, following his talks with Papandreou, Sarkozy promised Greece that eurozone countries would help it overcome its financial problems and vowed a European crackdown on the financial speculators that Athens blames for its woes.

“The main actors on the European stage are decided to do whatever is needed to make sure Greece is not isolated,” said Sarkozy.

The president rulied out immediate financial backing, but stressed that his economy minister was drawing up aid scenarios.

“Christine Lagarde, in tandem with her colleagues in the eurozone and in Europe … is working on a certain number of precise measures if Greece needs them,” he said, standing alongside Papandreou.

Papandreou had come out of Friday’s meetings with Merkel and Jean-Claude Juncker, the Luxembourg prime minister, looking disappointed at the lack of specific pledges.

Following his talks with Sarkozy on Sunday, he was much more upbeat.

Papandreou said: “After my meetings more specific ways are beginning to emerge about how to deal with any possible borrowing problems.”