MARCH 6, 2010.
Greece's Plans Draw EU Praise, Spur Protests
By PATRICK MCGROARTY in Berlin and ALKMAN GRANITSAS in Athens
German Chancellor Angela Merkel signaled that Germany and its European Union partners would intervene to rescue Greece if its problems threatened to spiral out of control, but emphasized that she is "optimistic" that Athens won't need help.
"If it would be necessary, we would keep the financial stability of the euro under control together," Ms. Merkel said at a news conference after a short meeting with Greek Prime Minister George Papandreou in Berlin. She added that Greece had yet to request financial aid.
Mr. Papandreou's Berlin visit was part of a five-day tour of foreign capitals meant to shore up support for Greece on both sides of the Atlantic. The trip will also take the Greek leader to Paris and Washington in coming days.
The Greek parliament approved a €4.8 billion ($6.52 billion) austerity package on Friday. Lawmakers debated the measures for six hours as thousands of union members protested the spending cuts and tax increases on the streets outside. In Athens' evening gridlock, many locals listened to Ms. Merkel's comments on their car radios.
The package was passed by simple voice vote in the 300-member chamber. The Socialist government, elected in October, controls a 160-seat majority in parliament. Earlier Friday, the Communist Party of Greece withdrew from the debate in protest against the measures.
Ms. Merkel's comments about Greece are the latest sign that her government is pursuing a wait-and-see strategy with the crisis. That course enjoys wide support in Germany, a nation of savers who strongly oppose using taxpayer money to rescue a country that has lived beyond its means for years.
Yet Ms. Merkel's approach isn't without risk. Greece's crisis has rattled global markets in recent weeks, and though investors reacted positively to a package of austerity measures that legislators in Athens passed this week they say it remains far from certain that Athens can solve its problems alone.
If Germany and other leading euro-zone countries wait until Greece is on the brink before they mount a rescue, the crisis could spread to other vulnerable countries such as Portugal and Spain before they can stop it.
Greece found takers for a €5 billion bond offering this week but had to pay a steep 6.25% interest rate—about double the benchmark German bond yield. The country, already buckling under a debt load that exceeds its annual gross domestic product, needs to raise more than €20 billion in coming weeks to meet its obligations.
Ms. Merkel lashed out at the same markets that have been Greece's source of fresh funds for worsening the country's situation. She blamed "speculators," an oblique reference to hedge funds, for using derivatives and other exotic instruments to take advantage of the crisis. She urged other world powers, including the U.S., to place controls on such trading.
"Speculators can't be the ones to profit from the difficult situation in Greece," Ms. Merkel said.
Although recent public-opinion polls in Greece show general support for the government, a poll released by privately owned SKAI television Friday showed that 62% of Greeks expect social unrest in the country to rise. But the same poll shows that 78% of respondents think the austerity measures will be implemented nonetheless.
"There is nothing to debate about these measures," said Communist Party head Aleka Papariga. "We are withdrawing from the debate. The issue will be judged on the streets."
Write to Alkman Granitsas at
alkman.granitsas@dowjones.com http://online.wsj.com/article/SB1000142 ... _LeadStory
