GREEK PACKAGE:EUROPEAN LEADERS have pledged to stand by Greece as they step up efforts to recruit private creditors into a second international bailout for the country.
As an EU summit finished in Brussels, the leaders also confirmed the appointment of Italian central bank governor Mario Draghi to succeed Jean-Claude Trichet at the helm of the European Central Bank in November.
The leaders, who have relentlessly pressed Greek prime minister George Papandreou to secure parliamentary support for a new austerity plan, are reluctantly preparing a second rescue package for the country.
“We have agreed that there will be a new programme for Greece,” German chancellor Angela Merkel told reporters in Brussels.
“This is an important decision that says once again we will do everything to stabilise the euro overall.”
The pressure on Mr Papandreou comes as Greek opposition leader Antonis Samaras refuses to endorse budget and privatisation measures set out in Mr Papandreou’s latest deal with the EU-IMF “troika”.
Parliamentary approval for these measures in looming votes is crucial for the release next month of a €12 billion rescue loan under the first Greek bailout and for the approval of the country’s second bailout.
“I made it very clear that for the acceptance and for the stability of Greece, it would be highly desirable for the opposition to vote for this package,” said Dr Merkel, who met Mr Samaras at a meeting to European centre-right leaders on Thursday.
The chancellor confirmed talks were under way with German financial institutions to secure their agreement to participate voluntarily in a scheme to renew or rollover Greek debt as it falls due.
“I don’t want to comment on the current state of these talks, I think it’s most important for us to have these talks first and then report to you the results,” she said.
But French president Nicolas Sarkozy said banks and insurers in France were willing to participate in the initiative, which would reduce the level of loan funding required in the second bailout.
“We have had many meetings with the banks and insurance companies. There is no difficulty,” Mr Sarkozy said. His remarks are deemed significant as French institutions have the biggest international exposure to Greek debt.
With talks also proceeding in the Netherlands, Spain’s prime minister José Luis Zapatero said the Spanish were well disposed to the effort to secure private sector participation.
Mr Papandreou said the size of the second rescue package would be roughly comparable with the country’s first €110 billion EU-IMF package but added that its scale was dependent on the final contribution of private creditors.
Whatever the ultimate amount, he said leaders were still talking about “huge” figures. “It is a moment of historic importance. If everybody resists, worse things will come, perhaps even bankruptcy,” he said.
Two votes in the Greek parliament have prompted anxiety among European leaders about the risk of failure, but they have resolved not to allow the country default.
Mr Papandreou believes he has enough votes to win but EU leaders fear some wavering MPs may seek to block the plan. Mr Papandreou said Europe’s pledge to help Greece will make it easier for him to persuade Greeks to accept the latest round of cutbacks and tax increases.
Mr Draghi’s appointment had been expected but it was held up at the last minute as France sought a place in the ECB’s executive board to compensate for the loss of Mr Trichet’s position when he retires.
Italian ECB executive board member Lorenzo Bini Smaghi had refused to stand down, saying he would not compromise his independence as a central banker. However, Mr Sarkozy said Mr Bini Smaghi phoned him yesterday to say he will move to new duties before the end of the year.
Mr Bini Smaghi had been tipped to succeed Mr Draghi, something which would have seen him move to the ECB governing council from the executive board, but Italian prime minister Silvio Berlusconi and the country’s finance minister have backed other candidates.