Sarkozy calls Greek euro entry a mistake

French president’s remarks come amid a global stocks rally and a eurozone bailout-fund official’s visit to China.

The French president has said it was a “mistake” to allow Greece to enter the eurozone, comments likely to inflame tensions between EU member states just hours after a deal was reached on a bailout plan for Greece.

“Let’s be clear: it was an error,” Nicolas Sarkozy said in an interview with French television of the decision to let Greece join the monetary union in 2001.

“Its economy was not ready to assume its integration into the euro”.

Nevertheless, world stocks continued to rally on Friday and the euro jumped to a seven-week high against the dollar after European leaders agreed on a debt deal in Brussels aimed at resolving the two-year-old eurozone sovereign debt crisis.

The plan, announced early on Thursday, would increase the eurozone rescue fund to $1.4tn, implement a 50 per cent write-off for private bond-holders of Greek debt and recapitalise the region’s banks.

European leaders have also raised the idea of asking China, Brazil and other emerging economies to help overcome the debt crisis.

Eye on China

Klaus Regling, the head of the eurozone bailout fund, was due to meet Chinese officials in Beijing on Friday, and was expected to ask for China’s help in boosting market confidence in the euro..


  Private bond-holders of Greek debt asked to bear 50 per cent losses on their investment
  Europe’s banks told to cut dividends and bonuses to strengthen their balance sheets
  Planned increase in European Financial Stability Facility, the $600bn mechanism set up to provide support to eurozone economies

Q&A on euro zone debt crisis

Regling, chief executive of the European Financial Stability Facility (EFSF), described his visit as “regular”, saying there were no formal negotiations under way and he did not expect to reach a conclusive deal with Chinese leaders during this visit.

“These are regular consultations at an early phase,” Regling said at a briefing. “Don’t expect any precise outcome of our talks.”

China has invested significant sums in European bonds and has repeatedly called on Europe to address its debt crisis, saying a failure to act risks dragging the world back into recession.

Chinese state media have reported that the country has agreed to contribute to the EFSF, but there has been no official confirmation and Beijing has given little indication of how it might be prepared to help.

Hu Jintao, the Chinese president, told Sarkozy on Thursday that he hoped the latest euro rescue deal would help stabilise European financial markets.

Market gains

Asian markets extended their rally on Friday from the previous day. Tokyo gained 1.16 per cent, Hong Kong added 1.89 per cent by the break, Seoul climbed 1.04 per cent and Shanghai was 1.10 per cent higher. Mumbai added 2.88 per cent and Sydney was flat.

European stock markets recovered on Thursday, with Frankfurt’s DAX 30 up 5.35 per cent, the Paris CAC-40 jumping 6.28 per cent, and London’s FTSE-100 up 2.89 per cent.

Athens jumped 4.82 per cent and Milan was 5.49 per cent higher.


EU leaders hope to prevent the spread of
the debt contagion

The euro hit an eight-week high above $1.42 in New York late on Thursday before settling at $1.4187.

European banks now face the challenge of having to find $146bn to shore up their capital by the end of June.

“European leaders have been accused of procrastinating, which they say made the situation worse,” Al Jazeera’s Jacky Rowland reported from Berlin.

“But the question is how in practice will it work, how will the money come into that fund.”

Greece is inundated with debt and in its third-straight year of recession.

Without a “firewall” in place, analysts said its economic troubles could cross over to other eurozone economies, like those of Ireland and Portugal, and to bigger economies such as Italy.

But George Papandreou, the Greek prime minister, has praised the fresh deal.

In a televised address on Thursday, he said: “After the battle we have won, which is of huge importance for the country … we will continue to work intensively so that Greece becomes productive”.

Shaky finances

Investors may have responded positively to the deal, but others warned that more still needed to be done to shore up the eurozone’s finances.

Analysts said the broad agreement was just the beginning and European policymakers would need to overcome several hurdles to fully resolve the debt crisis.

Shahin Vallee, an economist, told Al Jazeera that it would take years before Greece’s economy could stand on its own.

“I think that it’s clear that whatever comprehensive solution we have achieved over night it hasn’t solved the crisis at all,” he said.

“It is comprehensive in the sense that it deals with several bits of the crisis – the banking part, the sovereign part, the institutional part.

“But it’s not comprehensive in the sense that so long as countries like Greece or Spain cannot borrow on their own, we wouldn’t solve anything. And I think that’s a few years down the line. We haven’t even touched that.”

Source : Al Jazeera, News Agencies


Many people in Greece are frightened, and their assumptions about a comfortable future have been shattered.

31 Oct 2011
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