Prime Minister George Papandreou is due to meet Chancellor Angela Merkel Monday as Greece waits for its next loan tranche and its eurozone partners discuss the creation of a new package to protect the euro from a possible Greek default.
Papandreou and Merkel are due to address German industrialists before having dinner together. Sources said Athens does not expect any tangible outcome from the meeting but it should provide a guide to Germany?s thinking on what the eurozone?s next moves should be.
Following talks between officials at a gathering of the International Monetary Fund and the World Bank in Washington over the weekend, it emerged that Germany and its eurozone partners are considering the option of allowing Greece to conduct an ?orderly default? that would involve a 50 percent write-down on its debt. This move would be accompanied by a vast increase in the scope and size, possibly to more than 2 trillion euros, of the rescue fund known as the European Financial Stability Facility (EFSF).
Despite widespread reports about the new thinking within the eurozone, Athens denied that it had discussed the proposals. ?This discussion has never been held at government levels,? said government spokesman Ilias Mossialos. ?There are reports that others are examining it? we are not delving into such issues.?
Finance Minister Evangelos Venizelos said nobody else could know what was discussed between himself, IMF Managing Director Christine Lagarde and European Central Bank President Jean-Claude Trichet on Sunday. ?What is absolutely certain is that there has not been and could not have been any discussion about the so-called scenario of an orderly default.?
Athens insists it is focusing on implementing the latest set of austerity measures aimed at stabilizing its public finances. A European Commission spokesman, meanwhile, said no decision would be taken on Greece?s 8-billion-euro loan tranche at the Eurogroup meeting on October 3.
Instead, officials from the Commission, the IMF and the ECB will visit Greece this week to examine the measures the government has proposed and how likely it is they will be implemented and meet their targets, which include reducing the public deficit to 7.5 percent of GDP this year. Sources said that the troika is also waiting for Athens to confirm at least one privatization before it releases the next loan installment.