Sarkozy to push Germany for eurozone integration

AFP - France's President Nicolas Sarkozy promised on Friday to push Germany over his plan to more closely integrate eurozone economies after meeting Greek Prime Minister George Papandreou in Paris.

Sarkozy said he had been convinced by Papandreou's promise to cut Greece's debts and deficit, and said he would himself travel to Germany next week and push Europe's plan to reassure markets.

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"It's not possible to let Greece fall, for moral and economic reasons," Sarkozy said, adding that he believes Athens to be "totally determined" to live up to promises to slash its deficit.

Sarkozy said he would meet in the coming days with Germany's Chancellor Angela Merkel "to discuss ways and means to accelerate the economic integration of the eurozone economy."

He also said he would push for Greece to receive a previously agreed EU bail-out more quickly, despite concerns in some eurozone member states that Athens is dragging its feet over austerity measures.

For his part, Papandreou repeated his determination "to make the necessary changes, we are making the sacrifices and we will live up to our part of the decisions we have taken."

"We want to change Greece and make Greece a competitive and socially just and transparent country," he told journalists.

The Greek premier meeting with Sarkozy at the Elysee Palace came a day after German lawmakers threw the ailing eurozone a lifeline by agreeing to boost the bloc's 440-billion-euro ($590-billion) bail-out fund.

The plan received fresh impetus from Austria, which Friday became the 14th of 17 eurozone members to approve the funds and the European Commission, which urged possible hold-out Slovakia to move quickly to add its name to the deal.

France will be one of the key contributors to the expanded fund while its own banks are critically exposed to sovereign debt from Greece and other weak links in the eurozone chain -- Italy, Spain and Portugal.

France's concern is not just to maintain the stability of the eurozone but also to protect its own banks, which are seen as overexposed to risky debt from Mediterranean countries and short of liquidity.

Meanwhile, in Athens, officials from the European Union, European Central Bank and International Monetary Fund were conducting an audit to decide whether to disburse eight billion euros ($11 billion) of crucial aid for Greece.

While three smaller eurozone members have yet to approve the expansion of the broader bail-out fund, Greece is waiting on this installment of a first bailout accord in May 2010 to pay its bills next month and so avoid default.

Payments depend on whether the EU-ECB-IMF troika of creditors, who got to work on Thursday studying Greek government accounts, agree that Papandreou's harsh austerity plans go far enough to clean up Greece's books.

The Greek press agency Ana said the auditors met Transport Minister Yannis Ragoussis to discuss restructuring public transport, including the part privatisation of the national rail service.

After the closed door meeting, Ragoussis said he understood the need to not give in to mass protests by interest groups, such as those by taxi drivers opposed to the deregulation of their industry.

Friday's meeting was delayed and held in a secret location after civil servants protesting cuts in public services occupied several ministries.

The audit is open-ended but the experts are expected to report before G20 finance ministers meet in Paris on October 14 and 15. France holds the G20 rotating presidency and will want a plan in place to reassure the markets.

A spokesman for the German finance ministry said negotiators were close to agreeing a deal to assuage Finnish concerns about Greece's reforms.

Under pressure from eurosceptic voters, Finland's government has demanded Greece put up collateral for further bailout aid.

European stock markets -- and French banking shares in particular -- have been extremely volatile in recent weeks, riding a roller-coaster of rumour about liquidity crunches, possible defaults and new rescue plans.

They climbed strongly after the German vote to back the expansion of the European Financial Stability Facility but fell back Friday following bad inflation data from the eurozone economies.

Eurozone inflation soared to 3.0 percent in September, up from 2.5 percent in August, according to figures announced Friday, just days before European Central Bank chief Jean-Claude Trichet chairs his last policy meeting.

There had been hopes in the markets that lower inflation would allow the ECB to cut interest rates and give a shot in the arm to slowing eurozone economies.