Berlin, Paris see eye to eye on Greece
Merkel, Sarkozy unite behind idea of further help being provided, back Vienna Initiative as a basis
German Chancellor Angela Merkel and French President Nicolas Sarkozy have united behind the idea of providing further assistance to Greece and that private investors should participate in the scheme on a voluntary basis.
The two leaders said at a joint news conference yesterday that the private sector participation could happen on the basis of the socalled Vienna Initiative.
Merkel said this approach, based on the 2009 agreement by banks to maintain their exposure to debt in Central Europe at the height of the financial crisis, was a “good foundation” for a Greek deal and dispelled rumors earlier this week that Germany wanted to wait until September before making a decision.
“The Vienna Initiative... is a good foundation and I believe that we can move forward on this basis,” she said.
Her backing of the Vienna solution represented a shift for Berlin, which earlier this month had said in a letter to its eurozone partners that they wanted a more far-reaching bond swap to ensure fair burden-sharing from the banks that hold Greek sovereign debt.
“We have to move forward on this now and I think it makes sense to involve the private sector. This is important for us,” she said.
Sarkozy listed four criteria that must be met to ensure a role for the private sector, including that it be voluntary, avoid creating a “credit event,” have the backing of the European Central Bank and be sealed rapidly.
“We want to go as quickly as possible without fixing a date,” Sarkozy said. “Since September is not as quickly as possible and we may have other concerns in August and we are in the second half of June, you see what I mean.”
The cost of insuring Greek debt fell after the German chancellor withdrew her demand that bondholders be forced to shoulder a “substantial” burden in a rescue.
Credit default swaps on Greece were at 1,895 basis points, having risen as high as 2,237 basis points on Thursday, according to CMA. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments tumbled 14.5 basis points to 220.5 basis points.