Greece urged to implement fiscal reforms

The leaders of France and Germany have told George Papandreou, the Greek prime minister, that it is vital for the government in Athens to implement reforms and meet fiscal goals set under a July 21 bailout plan.

Patience is wearing thin among core eurozone countries with Greece’s failure to meet fiscal and structural reform targets set out under its European Union-International Monetary Fund bailout.

Fears of a Greek default, or even an exit from the eurozone, are rattling financial markets.

In a joint statement in Paris and Berlin, French President Nicolas Sarkozy and Angela Merkel, the German chancellor, urged Greek leaders on Wednesday to implement the terms of a bailout plan while saying they were determined to keep Greece in the eurozone.

The heads of the eurozone’s two largest economies discussed the situation in a conference call with Papandreou and Evangelos Venizelos, the Greek finance minister.

“Putting into place commitments of the [bailout] programme is essential for the Greek economy to return to a path of lasting and balanced growth,” the two leaders said, adding that Papandreou had confirmed his government’s determination to take all necessary measures to meet targets.

Credible plan

Eurozone parliaments are still pushing through budget amendments required under a July 21 agreement on a new Greek rescue package, but the French and German leaders said that Greece had to fulfil its part of the deal.

“This plan was validated by the IMF,” Valerie Pecresse, the French budget minister, said earlier on Wednesday.

“It is a credible plan to put Greece back on the right path. We want a guarantee that the recovery plan announced will be put into action.”

A Greek government official, who requested anonymity, said after Wednesday’s conference call: “We now expect the troika report to confirm 2011-2012 targets will be achieved after the additional measures we announced.”

Greece’s quarterly bailout payments depend on reviews by international debt inspectors appointed by the European Commission, the European Central Bank and the International Monetary Fund, known as the troika.

Eurozone policymakers have threatened to withhold a sixth bailout tranche to Greece because of its fiscal slippages, but Sarkozy and Merkel said they were determined to keep Greece within the eurozone.

‘Solidity of partnership’

Pecresse said that the French government was determined to stand by Greece.

“[Sarkozy reiterated] the solidity of the Franco-German partnership in defending the eurozone,” she said.

“The president and the prime minister reaffirmed with a single voice France’s determination to do everything possible to save Greece.”

In other news, European shares rose on Wednesday on hopes a plan by Jose Manuel Barroso, the European Commission president, for the introduction of common eurozone bonds would help ease the sovereign debt crisis.

Barroso said Europe was facing its most serious challenge for a generation, adding there was no simple solution.

A ruling by Germany’s top court last week made it nearly impossible for the government to pool debt with partners, unless the European Union treaty was changed.