Greece, euro facing test of endurance

Eurozone finance ministers were locked in talks until late on Monday night as they attempted to find a more effective way to tackle the debt crisis in Greece amid fears that Italy could be the next country to be engulfed by economic woes.

The ministers met in Brussels with the chief aim of finding a formula to help alleviate the debt burden on Greece. Ahead of the meeting, Greek Finance Minister Evangelos Venizelos pointed to the high stakes involved, especially now that Italy has seen a sharp rise in its bond yields. ?Greece is a laboratory where the endurance of the euro is being tested,? he said.

An earlier proposal by French banks to roll over Greek debt had been rejected as it appeared it would add to the Greek debt mountain rather than reduce it. It also triggered fears of Greece entering a ?selective default,? which the European Central Bank vehemently opposes.

?We?ve painted ourselves into a corner,? an unnamed European official told Reuters. ?At this point either someone – Germany, the ECB – has to fundamentally shift position, or everything blows up.? Another idea being discussed yesterday was for the European Financial Stability Facility (EFSF) to buy back Greek bonds. However, Germany is known to oppose this proposal.

In Athens, meanwhile, sources close to Prime Minister George Papandreou were saying that the latest developments in the eurozone crisis, which have led to growing concerns about the Italian economy, have vindicated the premier. Since the Greek crisis began, Papandreou has argued that the problems were part a systemic failure within the eurozone rather than exclusive to Greece.

In the same vein, government spokesman Ilias Mossialos issued a statement yesterday drawing attention to the structural reforms that PASOK is carrying out and called on Greece?s European partners to show equal focus and commitment to tackle the eurozone crisis.

?Greece is doing its duty and will meet its responsibilities,? he said. He called on other eurozone countries to ?meet the need to safeguard a strong, united Europe of solidarity, which will develop a new relationship with the markets and which will create a more stable mechanism for handling the debt of each member state.?

The Cabinet is due to meet at noon on Tuesday to discuss, among other things, the proposed university reforms.