Greece warned it must make sacrifices for rescue package
Germany and France warned Greece yesterday that they expected big sacrifices in return for economic rescue as fears grew that a Greek bailout may not be enough to halt contagion in Europe's single currency.
Resistance to a planned €30bn EU package also appeared to grow in Germany over the weekend with some politicians and media calling for Greece to be expelled from the eurozone.
The German and French finance ministers said Athens could not take for granted the EU agreement to approve the emergency loans that it requested on Friday to stave off default.
A further €15bn in loans are due to be approved by the International Monetary Fund (IMF), although there were warnings from one member that the size of aid may have to be increased.
German Finance Minister Wolfgang Schauble told Greece that it must restructure its economy radically as an "unavoidable and absolute prerequisite" if Berlin and the EU were to approve the aid.
Germany is expected to be the biggest contributor, providing about €8.4bn. France has been asked to deliver €6.3bn. Britain is not involved.
"The fact that neither the EU nor the German government has taken a decision means that the response can be positive as well as negative," Mr Schauble told 'Bild' newspaper. "This depends entirely on whether Greece continues in the coming years with the strict savings course it has launched."
Greece must guarantee extra economic measures in 2011-12 and the stability of the euro must not be threatened, Mr Schauble added. In Paris, Christine Lagarde, his French counterpart, said that Greece had failed Europe and concealed the true state of its economy.
"We will need stricter control mechanisms to make sure we don't fall into a bottomless pit," she said.
The EU would halt payments if there were any suspicion that Athens was not playing the game, she added. French officials wondered privately whether the government of George Papandreou would be able to survive public hostility to an austerity programme that cuts civil servants' pay, freezes pensions and raises taxes.
In contrast, the IMF sought to reassure the Greek public.
"The citizens of Greece should not fear the IMF.
"We are there to try to help them," said Dominique Strauss-Kahn, the IMF chief and a former Socialist finance minister in France.
In Washington, Timothy Geithner, the US Treasury Secretary, urged the Greek government, European officials and the IMF to "move quickly to put in place a package of strong reforms and substantial concrete financial support".
There was optimism in Brussels that the package of EU loans, to be repaid at a concessionary 5pc interest rate, would go through -- although German reluctance remains a hurdle.
"Everyone is afraid that other countries in difficulty in the eurozone could be infected," said an EU official. Portugal and Italy, which both have large debt burdens, are being mentioned as the possible next target for market speculation. (© The Times, London)