Greece blames Germany for new turmoil
Greece promised yesterday to stick to its deficit-cutting plan, while its prime minister warned that Germany's tough stance could push debt-laden nations such as Portugal and Ireland to bankruptcy.
Greek Prime Minister George Papandreou said Germany's insistence on a future mechanism for banks and bond markets to share the pain of any eurozone sovereign debt default from 2013 could seriously damage some EU economies.
"This could break backs. This could force economies towards bankruptcy," Mr Papandreou said yesterday during a visit to Paris.
The yield spreads of government bonds of deficit-ridden nations such as Greece, Ireland and Portugal have soared since German Chancellor Angela Merkel last month kicked off a debate about a debt restructuring mechanism for troubled eurozone nations, although EU finance ministers have since said it would not apply to existing bonds.
"It created a spiral of higher interest rates for countries that seemed to be in a difficult position, such as Ireland or Portugal," Mr Papandreou said. "This could create a self-fulfilling prophecy."
The eurozone's debt crisis erupted last year when Mr Papandreou's government revealed that Greece's finances were in much worse shape than previously thought.
Yesterday, the EU statistics agency Eurostat revised upwards Greece's 2009 deficit for a third time, to 15.4pc of gross domestic product compared with a previous estimate of 13.6pc. Greece's Finance Ministry said that it would still manage to bring the shortfall below the eurozone's 3pc GDP ceiling in 2014, starting with a 6pc cut this year to 9.4pc of GDP.