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Latest update : 2012-05-21

New French Finance Minister Pierre Moscovici (pictured) and his German counterpart at their first-ever meeting Monday pledged to do whatever was necessary to keep Greece in the eurozone, despite the nation's crippling debt.

AFP - Germany and France pledged Monday to do whatever was needed to keep Greece in the eurozone, as political turmoil in the debt-wracked country threatens to force it out of the club.

With new elections looming next month in Greece and Spain's crippling recession showing no sign of abating, the eurozone crisis dominated talks in Berlin between German Finance Minister Wolfgang Schaeuble and his new French counterpart Pierre Moscovici.

"We agreed that we have to do everything to keep Greece in the euro club," Schaeuble told a joint press conference.

"We both believe that Greece has its place in the eurozone," Moscovici said, adding that "the commitments undertaken had to be respected" in reference to reforms demanded in return for huge bailout packages.

Europe has to support investment and economic growth in Greece "at a time when it is going through a violent recession," the French minister added.

The pair sought to present a united front ahead of a summit of EU leaders on Wednesday in Brussels, after a weekend G8 meeting left Berlin looking increasingly isolated with its austerity-driven solution to the crisis.

But they did not shy away from the main topic that divides them, with Moscovici reiterating his support for eurobonds -- the pooling of eurozone debt to enable indebted countries to borrow more easily on the financial markets -- which Berlin vehemently opposes.

Moscovici said that new French President Francois Hollande, who last week met German Chancellor Angela Merkel just hours after his inauguration, wanted to "put everything on the table, even topics that not everyone agreed on."

Eurobonds are a "strong idea," he said.

He stressed Europe had to come up with concrete results by a June summit.

Schaeuble said Germany "would participate in all constructive ideas to strengthen sustainable growth" but cautioned that budgetary consolidation was "a necessary precondition" for bolstering this growth.

Moscovici also insisted that France would play its part in reducing its own budget deficits, pledging: "The commitments made by President Francois Hollande during his campaign on public finances will be kept to."

France aims reduce its deficit to below the EU limit of three percent of gross domestic product by 2013 and balance its budget by 2017.

World leaders at the G8 summit Saturday stressed their unity on keeping Greece in the eurozone but acknowledged that "the right measures are not the same for each of us" -- a sign of growing opposition to German-led austerity.

EU leaders will seek to bridge their differences at an informal summit on Wednesday, aiming to lay foundations for a new "growth" strategy and agree cross-border borrowing to kick-start targeted investment.

And in a reminder that the crisis was not limited to Greece, Spanish Economy Minister Luis de Guindos predicted that Spain's economy, already mired in recession with record-high unemployment, would shrink again in the second quarter.

Madrid already unsettled markets by revising higher its 2011 public deficit on Friday, projecting 8.9 percent of gross domestic product instead of 8.51 percent as reported earlier.

Schaeuble said he was "completely confident that Spain will take the necessary decisions to put it back on the right path and regain the confidence of the financial markets."

The French minister dodged a question about whether Paris would support Schaeuble as president of the eurogroup of eurozone finance ministers when Jean-Claude Juncker's term ends in July.

He said the decision would be made as part of a "package" of personnel choices, which includes appointing a new member of the European Central Bank's Executive Board.

There was certainly nothing personal against Schaeuble, Moscovici stressed, going out of his way to express admiration for the veteran German politician and his "European commitment."

Debate is currently raging over whether the EU's new fiscal pact, a treaty pushed through by Merkel to enshrine greater budgetary discipline, is enough to chart Europe out of its troubles.

Hollande has said he wants to renegotiate the pact to include more measures to boost economic output.

With markets still on edge as they wait for signs at Wednesday's informal EU summit that leaders are getting to grips with the crisis, Berenberg Bank analyst Holger Schmieding cautioned that time was short.

"Merkel and Hollande know that they cannot afford to argue for long," he said in a research note.

European stock markets mostly rebounded on Monday as G8 support for Greece to remain in the eurozone boosted sentiment after last week's sharp sell-off, traders said.

London's benchmark FTSE 100 index closed up 0.70 percent to 5,304.48 points after tumbling by five percent last week.

In Frankfurt, the DAX 30 added 0.95 percent to 6,331.04 points and in Paris the CAC 40 gained 0.64 percent to 3,027.15 points.


Date created : 2012-05-21


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