Mixed bag from Paris for Greece

Greece?s hopes that German Chancellor Angela Merkel and French President Nicolas Sarkozy would take a decisive step toward launching Eurobonds at a meeting in Paris on Tuesday were dashed but the two leaders backed a financial transaction tax in the eurozone, which Premier George Papandreou has said he is in favor of.

Merkel and Sarkozy said they were determined ?to defend the euro? and called for closer economic governance among the 17 countries that use the single currency. They proposed that European Council President Herman Van Rompuy chair meetings of eurozone officials twice a year to ensure members are doing their utmost to keep their public finances in order.

The two leaders threw their weight behind the idea of introducing a financial transaction tax, which Greece has supported strongly over the last few weeks. ?The French and German finance ministers will table a joint proposal at the EU level next September for a tax on financial transactions,? said Sarkozy. ?This is a priority for us.?

Merkel, however, said that a common bond, or Eurobond, which would allow the 17 countries to pool their debt risk, would only be considered as a ?last resort.? Sarkozy said, ?Eurobonds can be imagined one day.?

?What we are proposing here is the means with which we can solve the crisis right now and win back trust, step by step? I do not think Eurobonds will help us in this,? said Merkel.

There was no official comment on the Paris talks, which were being watched closely by the prime minister, from the Greek government by late last night. Papandreou is due to call a cabinet meeting on Thursday in a bid to get his ministers to shift their focus back to domestic matters.

The premier will have to contend with domestic issues of another kind over the next few days as well. His party is due to hold its national congress on September 3 and then Papandreou is due to deliver the prime minister?s customary economic policy speech at the Thessaloniki International Fair on September 10.

However, before that he may have to deal with fresh disquiet within PASOK about the austerity measures being adopted, particularly the further cuts facing civil servants. A member of PASOK?s political council on Tuesday accused the government of ?losing touch with reality? and adopting measures that are ?nearly wiping out Greek society.?

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