PARIS (AP) — France and Germany on Monday sought to impose tighter controls on Greece's finances and warned political leaders in Athens to agree on new austerity measures soon if they didn't want to see their country go bankrupt.
President Nicolas Sarkozy of France and German Chancellor Angela Merkel said Greek leaders need to push through reforms in order to obtain new funds in a second planned bailout worth (euro) 130 billion ($171 billion).
The country needs the money to repay a bond coming due in March. But Greek party leaders have been unable to agree to the new measures, missing multiple deadlines in the negotiations, and delayed their latest meeting to Tuesday. Financial markets remain on edge as investors await the outcome of the talks.
“Something has to happen quickly,” Merkel said. “Time is pressing and for the entire eurozone much is at stake.”
Meanwhile, Greece's coalition government said Monday that it had accepted demands by rescue creditors to cut 15,000 jobs in the public sector this year, under a new law that allows firings.
Public Sector Reform Minister Dimitris Reppas made the announcement Monday.
The announcement signals a major shift in Greece's policy, as state jobs have so far been protected during the country's acute financial crisis, which started about two years ago.
In a sign of their lack of confidence in the Greek politicians, Sarkozy and Merkel called for Athens to set up a separate account to ensure that billions of euros in bailout money go directly to servicing debt, and not other government spending priorities.
The proposal would amount to a financial straitjacket that would force Athens to put a higher priority on repaying its foreign lenders than on financing government services.
“I also support the idea that the necessary interest payment for the debt service is put on an extra account to make sure that Greece will steadliy make this money available,” Merkel said.
Merkel and Sarkozy, a lockstep pair some pundits have referred to as “Merkozy,” spoke during the 14th French-German Council of Ministers that focused on coordinating the countries' tax policies and Europe's debt crisis.
Most attention Monday centered on Athens, where Greek Prime Minister Lucas Papademos is due to meet with negotiators from the eurozone and the International Monetary Fund then with the leaders of the three parties backing his coalition.
The talks follow an intense weekend of negotiations that failed to produce a breakthrough on the second international bailout and on a second deal, a writedown by banks and other private investors in their share of the country's crippling debt load.
A Sarkozy aide, speaking on condition of anonymity because of presidential palace rules, said the plan to earmark some of Athens' funds would help ensure that Greece, once its debt is fully restructured, would be able to service its debt.
Details of the proposal still need to be worked out, the aide said. One option would be for Greece to write into law a higher priority on servicing debt. Another could involve blocking funds from the International Monetary Fund or European lenders in an account to ensure a focus on debt service.
