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    June 17, 2011

France, Germany Show Solidarity on Greek Economy

   Selah Hennessy | London
   French President Nicolas Sarkozy and German Chancellor Angela Merkel
   brief the media at a news conference after their meeting at the
   chancellery in Berlin, June 17, 2011
   Photo: AP
   French President Nicolas Sarkozy and German Chancellor Angela Merkel
   brief the media at a news conference after their meeting at the
   chancellery in Berlin, June 17, 2011

   The leaders of France and Germany signaled Friday they want to find a
   quick solution to the economic crisis in Greece. In Greece, the prime
   minister reshuffled his Cabinet and replaced his finance minister.

   Speaking in Berlin, German Chancellor Angela Merkel and French
   President Nicolas Sarkozy said the stability of Europe's single
   currency, the euro, is their top priority.
   Greece, a nation in the eurozone and part of the single currency, is in
   major debt. It needs a multi-billion-dollar loan from its euro
   neighbors in order to avoid defaulting on that debt.
   France and Germany had been at odds over whether private holders of
   Greek bonds should be involved in a Greek rescue package.
   But on Friday, Merkel said the two countries were on the same page. She
   said that private investors should participate only on a voluntary
   basis. She added that mandatory participation does not have a legal
   basis.
   Analysts say this is a softening of Germany's position, which they say
   had been leaning towards forcing losses on private creditors.
   President Sarkozy said Friday that France and Germany are committed to
   defending the euro. He added that their program has to be put in place
   quickly.
   It is a sign that European countries may be moving closer to a deal to
   help Greece out of its immediate financial straits.
   But Mark Weisbrot, co-director of the U.S.-based research group the
   Center for Economic and Policy Research, says a bailout in its current
   form is not going to help Greece in the long run.
   "Greece needs to get out from under a big part of that debt, a big
   part," said Weisbrot. "Because otherwise, if you have a settlement and
   there is just a restructuring that allows some payments to be made
   later and none of the principles to be reduced, for example, then
   you're just going to end up in the same situation a year or two down
   the road."
   The European Union and the International Monetary Fund (IMF) have made
   tough austerity measures a condition of any bailout.
   Those measures are adding to social unrest in Greece and putting major
   political pressure on the leading Socialist party. On Friday, a new
   finance minister was appointed amid a reshuffle of the Cabinet.
   And on Wednesday, tens of thousands of people turned out in the streets
   to protest against tax hikes and spending cuts.
   Weisbrot says austerity is not the key to improving Greece's economic
   situation, and, in his opinion, Greek citizens are right to battle the
   policy.
   "I think what they're doing right now is important," Weisbrot added.
   "They're in the streets and that's where the only pressure is coming
   from. And I think they should demand that their government not accept
   any terms that doesn't get the economy growing immediately."
   The IMF said Friday that sovereign debt troubles in Greece and other
   eurozone countries are putting the global economic recovery at risk.
   Speaking in San Paulo, Brazil, the IMF's research director, Olivier
   Blanchard, said policymakers have to act now to make the financial
   system more robust.