Arab Today, arab today europe grapples with \greatest challenge\ over debt
Last Updated : GMT 18:07:16
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Arab Today, arab today

Europe grapples with \'greatest challenge\' over debt

Arab Today, arab today

Arab Today, arab today Europe grapples with \'greatest challenge\' over debt

Strasbourg - AFP

The European Union grappled Wednesday with the biggest challenge of its history as Greece readied a last-gasp pitch to secure vital bailout funds. Nearly four weeks after international auditors abruptly quit Athens, placing eight billion euros of promised loans in doubt, the key negotiators announced a return to crunch talks in Greece from Thursday. \"We are today faced with the greatest challenge our Union has known in all its history,\" European Commission president Jose Manuel Barroso warned in his annual \"state of the union\" address to the European Parliament in Strasbourg. European stock markets were mostly cautious as optimism faded over whether European leaders can resolve the debt crisis, with German Angela Merkel suggesting a second Greek bailout may need to be renegotiated while Berlin, Paris and the European Central Bank split over how much banks should lose in the event of a default. \"This sort of in-fighting amongst Europe\'s leaders will only serve to undermine the recent rally in shares and the euro, underlining the importance of the audit\'s findings,\" said Moneycorp in a note to investors. In Brussels, EU economic affairs spokesman Amadeu Altafaj said crunch negotiations over blocked money the Greek government says it needs to avoid an early default will resume on Thursday. Once auditors decide the government in Athens is doing enough to merit more financial aid, eurozone partners and the International Monetary Fund will still have to sign off the money. Finance ministers meet on Monday in Luxembourg, but Altafaj indicated that the negotiations in Athens would not be concluded in time, saying a further meeting of the 17-nation currency Eurogroup would be called to make that decision \"as soon as possible.\" While Greece is left waiting for the funds from a first 110-billion-euro bailout approved last year, a few eurozone states have yet to sign off on a second 159-billion-euro Greek rescue package that was agreed in July. German lawmakers are due to vote on Thursday on expanding the scope and size of the EU\'s current rescue fund -- the European Financial Stability Facility (EFSF) -- which has already helped bail out Ireland and Portugal. Parliament in Finland, another country where there is deep-rooted reluctance to bailing out eurozone strugglers, approved changes to the fund on Wednesday. Greek Prime Minister George Papandreou, who held talks in Berlin on Tuesday with Merkel, said his country was making a \"superhuman effort\" to bring down its massive debt of more than 350 billion euros ($475 billion). In an interview with Greece\'s state television, Merkel said the audit could determine if a second bailout set up in July will stand as originally agreed. \"Should we renegotiate or not?\" Merkel said. \"Of course we would prefer that the figures remain unchanged, but I cannot foretell (the mission\'s report).\" A government spokesman said Greece would escape default. \"We are not far from securing (the loan tranche). One by one, pending issues are settled,\" deputy government spokesman Angelos Tolkas told Flash Radio. However the Financial Times reported the bailout had run into trouble, with some eurozone members pushing for private creditors to take a bigger writedown on their Greek bond holdings. The Greek parliament on Tuesday approved a controversial property tax that aims to plug a budget hole and help unlock the EU-IMF funds but this package is still not enough to save the Greek economy. A new EU rescue worth 159 billion euros was put together in July but the Greek government must jumpstart a privatisation drive that is months behind schedule to secure the funding. The government\'s austerity measures have met fierce resistance and Athens was again paralysed by a transport strike Wednesday, with police again using tear gas, ahead of protests by pensioners, municipal workers and students. Pushing for more unity in Europe, Barroso promoted the creation of controversial joint eurozone bonds, despite German opposition, saying they would be a \"natural and advantageous step for all\" against the crisis. The 17-nation single currency area is sharply divided over the idea of pooling their debt. Seeking to prevent future debt crises, the European parliament adopted on Wednesday stiffer budget rules armed with the threat of fines against governments with runaway deficits and debts. In Paris, the French government took its own steps to rein in spending, presenting an austerity budget for 2012 -- accompanied by a warning that eurozone debt \"turbulence\" could derail timid growth. France\'s total, accumulated debt will be higher than expected, hitting a record 87.4 percent of gross domestic product. French banks have taken a hammering on the stock market in recent weeks given high exposure to Greek debt, and ratings giant Standard & Poor\'s has previously warned Paris could suffer a credit downgrade depending on what steps Europe takes to fill a wider financial black hole over coming years.  

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