Merkel and Sarkozy Warn Greece on Debt

On Monday, Chancellor of Germany Angela Merkel and French President Nicolas Sarkozymet in Berlin to discuss their next steps in combating the sovereign-debt crisis. They warned Greece that it needed to move forward with promised reforms or risk losing the next installment of badly needed bailout funds.

“The situation is very tense, very tense,” said Sarkozy. There are increasing signs that Greece will fail to make the structural changes to its economy that its leaders have promised. Greek’s prime minister, Lucas Papademos, warned last week that without deeper spending cuts a disorderly default was a possibility, and could result in Greece leaving the euro.

“Our Greek friends must live up to their commitments,” said Sarkozy. If those commitments were not met by the Greek government “it will not be possible to pay out the next tranche” of the bailout money, added Merkel.

The recent  bad economic news have led many economists to predict the imminent return to recession for many of the countries that use the euro. At the same time, European countries and financial institutions need to raise roughly $2.4 trillion in 2012.

Merkel said that stabilizing the euro was “an ambitious but attainable goal. Our intention is that no country must withdraw from the euro area”. She and Sarkozy are scheduled to travel to Rome on January 20th for negotiations with the Italian government ahead of the next European Union summit in Brussels on January 30.

(MS)