June 17, 2011
Greece needs help, but what should that help look like? The question has deeply divided Europe this week, with many concerned about Berlin's demands for private sector involvement. A compromise emerged on Friday, but German editorialists are split over the way forward.
As French President Nicolas Sarkozy met with German Chancellor Angela Merkel in Berlin on Friday, it became obvious that the euro crisis is also putting a serious strain on Franco-German relations. Athens, it has become clear in recent weeks, needs additional aid from the European Union and the International Monetary Fund -- up to €120 billion -- in order to meet its debt obligations until 2014.
But Paris and Berlin have butted heads in recent weeks over what that additional aid package might look like. The German parliament has said it would only back a bailout package if private investors are required to cover part of the tab. France, however, along with several other euro-zone countries, are concerned that such a move would drive bailout costs even higher if credit ratings agencies respond negatively, as some have threatened to do.
Berlin has been calling for up €35 billion of the €120 billion package to be voluntarily coveredby private lenders -- largely through extending the payment terms or through reinvesting in new Greek bonds with proceeds from old ones as they mature.
On Friday, Merkel appeared to soften Germany's position on the involvement of private investors, saying it would be voluntary. She also emphasized that any plan would be closely worked out with the European Central Bank, which had been concerned about the uncompromising German position on Greek aid.
"This should be worked out with the ECB," Merkel said on Friday. "There may be no contraditions here."
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