Sun, Feb 28, 2010 page11

• Greek PM meets Deutsche Bank CEO

  SITTING OUT German banks have been among the biggest purchasers of Greek government debt, but several of them said on Friday they would shun Athens’ bonds

  • AP AND AFP
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  Greek Prime Minister George Papandreou held talks with the head of Germany’s biggest bank on Friday on the country’s wide-­reaching debt crisis, under intense EU pressure to show quick signs of improvement or cut deeper into spending.

  Meanwhile, the White House said US President Barack Obama had spoken with German Chancellor Angela Merkel and British Prime Minister Gordon Brown about Greece as part of a video teleconference on Friday. Papandreou is expected to meet Merkel in Berlin next Friday and Obama in Washington on March 9.

  The Greek government declined to provide any details on the discussions with Deutsche Bank CEO Josef Ackermann.

  “There was a half-hour meeting, one of several the prime minister has had with heads of similar organizations on the international crisis and Greece,” Papandreou aide George Elenopoulos said.

  Deutsche Bank spokesman Ronald Weichert said he could only confirm that Ackermann is in Greece “on a normal business trip,” meeting with government officials.

  However, Ackermann refused to comment after the meeting on the prospect of his bank playing a role in helping Greece, whose fiscal woes have shaken global markets’ confidence in the common European currency.

  The Wall Street Journal reported that Greece had delayed a major bond issue — aimed at raising between 3 billion euros and 5 billion euros (US$4.09 billion and US$6.8 billion) — due this week because of market turbulence ­following a general strike on Wednesday and warnings of possible credit rating downgrades.

  The issue has now been postponed until next week, the report said.

  “The new bond deal is widely seen as a test of the Greek government’s ability to raise money in the capital markets to finance its operations and retire old debt,” the report said.

  In another worrying development, several major German banks — Commerzbank subsidiary Eurohypho, Hypo Real Estate and Postbank — said on Friday they would shun Greek government bonds.

  German banks have been among the biggest purchasers of Greek government debt, according to data from the Bank of International Settlements, the so-called central bank’s central bank.

  The remarks by the German banks are likely to be seen as significant in that they signal a belief that bonds issued by Greece may have become too risky for some investors in high-class sovereign debt.

  But Greek bonds rallied on Friday on a report that Germany was considering coming to Greece’s aid.

  The yield on the 10-year Greek sovereign bond fell to 6.379 percent from 6.640 percent late on Thursday. Bond prices and yields move in opposite directions.

  The all-important spread — or differential — with the benchmark German Bund narrowed to 3.28 points from more than 3.50 at the start of the day.

  A source cited by Dow Jones Newswires said the German government was in discussion with the German development bank KfW that could lead to emergency credit for Greece.

  In Washington, Obama spokesman ­Robert Gibbs reiterated that the White House believes the EU “can and will act appropriately” to ensure an effective response to the crisis in Greece.

  Bolstered by polls showing that most Greeks — despite union anger — back austerity measures, Papandreou warned on Friday his center-left government faces a stark dilemma.

  “The dilemma is — are we going to let this country go bankrupt or are we going to react?” Papandreou asked lawmakers in Athens.

  “We have an obligation to the Greek people to do everything we can now, today, to face immediate dangers because tomorrow will be too late,” he said.

  Papandreou stressed that “no other country will pay our debts” amid speculation of possible emergency financing from the EU.

  EU Finance Commissioner Olli Rehn will be in Athens next week to inspect Greece’s budget reforms, ahead of a March 16 EU deadline for fiscal improvement or further belt-tightening.

  However, EU, European Central Bank and IMF inspectors in Athens this week expressed doubts Greece would be able to meet all its deficit-busting targets and urged additional austerity measures.

  Papandreou insists Greece is not seeking direct financial aid from EU countries but support that would calm financial markets and allow Athens to borrow money at pre-crisis rates.

  “We expect our partners ... to fulfill their commitments, both explicit and implicit, that derive from a community built on the dream of a unity that goes far above simple economic relations and narrow national interests,” he told parliament.

  “At the end of the day, it is a matter of honor and pride for our country to put our own house in order,” Papandreou said. “We must forget the political cost and only think of our country’s survival.”
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