|Sarkozy, left, and Merkel have differences of opinion over how Europe should handle the debt crisis [Reuters]|
Eurozone finance ministers have approved the latest installment in a financial aid package for Greece at the beginning of several days of talks aimed at addressing the eurozone’s financial crisis.
But payment of the $11bn tranche, which Athens needs to pay salaries beyond the middle of November, still requires of the go-ahead from the International Monetary Fund, which is sharing the burden of the bailout with the European Union.
“The disbursement is expected to take place in the first half of November, pending the approval by the board of the International Monetary Fund,” finance ministers from the 17-nation single currency bloc said in a statement on Friday.
European Union leaders are due to hold talks on Sunday and Wednesday to discuss a eurozone crisis strategy, including how to recapitalise banks and boost the impact of the region’s bailout fund.
Ahead of that, French President Nicolas Sarkozy and German Chancellor Angela Merkel are set to meet with senior European officials on Saturday amid divisions between the leaders of the eurozone’s two biggest economies over how they should respond to the crisis.
Key elements of a proposed rescue plan include building a “firewall” around Greece to prevent debt problems spreading to other weak eurozone economies includuing Italy, Portugal and Spain, stabilise bond markets, scaling up the eurozone’s rescue fund, known as the European Financial Stability Facility (EFSF), and reducing Greece’s $485bn debts.
France also wants to use more European Central Bank money to tackle the debt crisis, but that approach has run into strong resistance from Germany and other eurozone nations.
Wolfgang Schaeuble, Germany’s finance minister, hammered home Berlin’s message in Brussels on Friday, telling reporters: “We will stick to the situation as it is in the treaty; that the central bank is not available for state financing.”
Al Jazeera’s Jacky Rowland, reporting from Paris, said: “The French point of view is they are really worried about suggestions that the private sector should carry more of the burden, because French banks are already seriously exposed to Greek debt – so much so that French banks took out a full-page newspaper ad trying to reassure people that they can cope.”
France is also worried about losing its triple-A credit rating, with some analysts already suggesting that it risks a downgrade, possibly pushing up the cost of borrowing.
The summit’s outcome will determine whether investor confidence in the euro currency can be restored. It will also influence whether an expected Greek debt write-down triggers a chain reaction of financial turmoil across Europe.
As a first step, leaders of the 27-nation European Union are set to endorse a plan on Sunday to strengthen banks’ capital base and may also launch a procedure for longer-term reform of the eurozone’s economic governance, EU sources said.