France and Germany called Monday for the creation of a special account to ensure that billions of euros in bailout money for Greece goes directly to paying down debt, just as Greek politicians struggle to agree a fresh austerity plan that is being pushed for by international creditors.
President Nicolas Sarkozy of France and German Chancellor Angela Merkel said Greece’s leaders need to push through reforms in order to obtain any new funds in a second planned bailout worth €130 billion ($171 billion).
“We propose that the interest on Greek debt is placed in a blocked account that will also guarantee that the debts of our Greek friends will be paid,” Sarkozy said.
An aide to Sarkozy later explained that the French-German idea would involve setting up a restricted account to pay down interest on Greek debt — for now, the principal is not targeted.
Sarkozy and Merkel spoke as part of the 14th French-German Council of Ministers, which focused on coordinating the countries’ tax policies, as well as Europe’s debt crisis.
Most attention Monday centered on Athens where Greek Prime Minister Lucas Papademos is due to meet with negotiators from the eurozone and the International Monetary Fund then with the leaders of the three parties backing his coalition. The talks follow an intense weekend of negotiations that failed to produce a breakthrough on a new international bailout and major writedown by banks and other private investors in their share of the country’s crippling debt load.
The plan faces political resistance in Greece over the strict austerity terms involved and the markets remain on edge as investors await the outcome of the discussions.
Merkel insisted that Greece needs to meet the demands of the so-called “Troika” — the International Monetary Fund, the European Central Bank, and the European Commission — overseeing bailout efforts across Europe.
“I want to reaffirm, there can be no agreement if the Troika proposals are not implemented,” she said.” They are on the table. And time is pressing. Therefore something has to happen quickly.”
“Time is pressing and for the entire eurozone is much at stake.”