Greece, Europe struggle to contain default fears
Berlin • German Chancellor Angela Merkel sought Tuesday to calm market fears that Greece is heading for a chaotic default as Europe struggles to contain a crippling financial crisis.
Merkel rejected the notion that a Greek bankruptcy a possibility raised a day earlier by her deputy that spooked markets would provide a quick solution to the eurozone debt crisis that threatens to rumble across the Atlantic Ocean.
She argued that Europe instead needs to stick to its efforts to cut budget deficits and improve its competitiveness, and that resolving the crisis would be "a very long, step-by-step process."
Her comments came ahead of a teleconference Wednesday with French President Nicolas Sarkozy and Greek Prime Minister George Papandreou.
Fears of an imminent Greek default pushed interest rates on the country's 10-year government bonds up Tuesday to a record of more than 24 percent, although Merkel sounded optimistic regarding Greece's chances of getting the next batch of bailout cash from the so-called troika the European Commission, the European Central Bank and the International Monetary Fund.
Representatives from the three organizations are due back in Athens soon. Merkel also sought to defuse suggestions by Vice Chancellor Philipp Roesler and others that a default by Greece is a possibility. Roesler raised on Monday the specter of an "orderly insolvency" in the future, a notion the Dutch finance minister indicated was being considered.
She suggested that even an orderly default couldn't come any time soon, noting there isn't even a mechanism in place for a eurozone nation to default. The future European Stability Mechanism the eurozone's permanent bailout fund will start up in 2013.
Greece is relying on rescue loans to remain solvent. But lagging efforts to tame a bloated budget deficit and enforce reforms are threatening that lifeline, which is conditional on fiscal progress.
Athens is trying to convince international creditors that it deserves to get the next, sixth installment of money due from a bailout fund.