Eurobonds and reforms tackled after break

Following a brief break, the government will return to work on Tuesday with one eye on a potentially crucial meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel and the other on a set of reforms that need to be concluded ahead of the arrival of representatives from Greece?s creditors.

Prime Minister George Papandreou is expected to call a cabinet meeting soon after the return of all his ministers, with changes to the way universities are run and measures to boost flagging revenues topping the agenda. The government is also expected to unveil plans to clean up Greek sport, particularly soccer, which has been rocked by a match-fixing scandal.

?The state will have a coordinated and comprehensive response ready soon,? said government spokesman Ilias Mossialos. ?The minister will be making some announcements soon.?

The Cabinet will meet as Greece?s economy continues to remain entrenched in a deep recession. Figures released yesterday showed that gross domestic product had contracted by 6.9 percent in the second quarter of 2011, down on the 8.1 percent contraction in the first quarter. This puts Greece on course for a contraction of about 5.5 percent for 2011, making developments in the eurozone even more vital for the country?s future.

This is one of the reasons that Athens will be watching developments in Paris on Tuesday closely. Merkel and Sarkozy will meet following a week during which the market uncertainty triggered by the debt crisis threatened to upset the French economy. The two leaders will hold talks as momentum behind the idea of issuing Eurobonds — in other words notes that pool together the risks of all the eurozone countries — grows.

British Chancellor George Osborne and billionaire investor George Soros were among those who advocated Eurobonds. ?Otherwise, the euro will collapse,? said Soros.

Speaking to The Associated Press, German economist Peter Bofinger, who sits on a council that advises the German government on economic policy, said that Eurobonds would ?solve the problem we have right now overnight.?

?As soon as countries like Italy or Greece and Portugal can issue Eurobonds, they can always get the money the need from the markets and they will get it at low rates,? he said.