Gov?t fends off euro crisis

Greece insists that there is no danger of it defaulting over the next few months, as the eurozone comes under increasing pressure to strengthen the European Financial Stability Facility (EFSF), which will lend to Athens in the months to come.

?Our borrowing requirements for the transition period are covered,? Finance Minister Evangelos Venizelos told Sunday?s Kathimerini, referring to the period until the second rescue package for Greece — which envisages Athens borrowing from the EFSF — applies. Until then, Greece will continue to borrow under the terms of its initial agreement with the EU and the International Monetary Fund. Athens is due to receive an 8-billion-euro loan installment next month.

The second package, agreed on July 21 in Brussels, set aside 109 billion euros in loans for Athens but also called for the 440-billion-euro EFSF to be strengthened and made more flexible so it can be used to lend to Greece and buy its bonds on the secondary market. This process has yet to be approved by all the governments involved and Venizelos said it would take some time for the project to come to fruition.

?The decisions that were taken are like a newborn baby which is in an incubator,? he said. ?Our main aim should be to let it develop so that it can deliver the results we want.?

In a joint statement Sunday, French President Nicolas Sarkozy and German Chancellor Angela Merkel reiterated their commitment to the July 21 agreement, amid fears that the rising borrowing costs for Italy and Spain would overwhelm the eurozone.

?In particular, they stress the importance that parliamentary approval will be obtained swiftly by the end of September in their two countries,? the statement said, adding that Merkel and Sarkozy continue to support the principle of the EFSF buying bonds on the recommendation of the European Central Bank.

?In line with the July 21 decisions, France and Germany are confident that the ECB analysis will provide the appropriate basis for secondary interventions as it will help determine the case when financial stability of the eurozone as a whole is at risk,? the two leaders said.

ECB officials were conferring yesterday to decide whether the bank should buy Italian bonds as a way of protecting the euro and quelling market volatility prompted by rising bond spreads. There had been no decision by late last night.