German minister pledges investment in Greece

October 6, 2011 - 3:50 PM
Greece Financial Crisis

A protester throws a stone at riot police in front of the Greek parliament during minor clashes in Athens, Wednesday, Oct. 5, 2011. At least 16,000 protesters converged in the Greek capital, and a crowd of about 10,000 gathered in the northern city of Thessaloniki, as Greek civil servants walked off the job on a 24-hour strike Wednesday, paralyzing the public sector in a protest over ever-deeper austerity measures. (AP Photo/Petros Giannakouris)

VOULIAGMENI, Greece (AP) — Germany's economy minister said Thursday that all of Europe must help Greece recover from economic turmoil, and that German businesses would invest in the struggling country.

Philipp Roesler's comments came as the Greek government prepared to suspend thousands of civil servants as part of austerity measures aimed at staving off a debt default with the potential to roil the global economy.

"All the countries that are in the eurozone, we want to keep them in the eurozone," Roesler said after arriving in Greece at the head of a German business delegation. "The stronger ones must help the weak ones, especially in difficult times, but on the basis of economic prudence and financial stability."

The German minister spoke to hundreds of Greek and German business executives in a hotel ballroom on the coast just outside Athens, where civil servants demonstrated during a strike a day earlier and small groups of protesters skirmished with riot police in the center of the capital.

Roesler's carefully tailored message of solidarity contrasted with his reference last month to the possibility of an "orderly insolvency" for Greece. The comments unsettled already jittery markets and prompted German Chancellor Angela Merkel to dismiss the idea and demand that "everyone should weigh their words very carefully."

Michalis Chrysohoidis, Greece's development minister, said Greece's "historic crisis" offered opportunities as well as challenges, and acknowledged: "No one will support us if we don't show the ambition to make changes and cuts."

Greece's government prepared Thursday to submit a bill that aims to suspend 30,000 government workers at reduced pay by the year-end and to further cut salaries by an estimated euro2.8 billion ($3.73 billion). Parliament will vote next week on the bill.

The new cutbacks come on top of earlier salary and pension cuts, as well as a string of tax hikes over the past year and a half that have outraged ordinary Greeks trying to cope with a 16 percent unemployment rate.

A day after a nationwide strike by civil servants shut down the government and much of public transport, about 50 finance ministry workers protested peacefully on Thursday outside the General Accounting Office over the expected salary cuts.

"We are against much of what this bill contains, that's why we're here," said protester Tassos Goumas, the head of the umbrella group representing finance ministry employee associations.

Retired army officers demonstrated outside the defense ministry over pension cuts, while on the island of Crete, hundreds of angry farmers took over an administrative headquarters to voice their frustration at shrinking salaries.

Greece is struggling to meet budget targets to qualify for the next installment of a euro110 billion ($145 billion) package of international bailout loans it has relied on since May 2010 to pay its bills.

Finance Minister Evangelos Venizelos has said that Greece has enough money to pay pensions, salaries and bondholders through mid-November. But the country needs the next batch of loans, worth euro8 billion ($10.5 billion), to avoid bankruptcy.

Debt inspectors from the International Monetary Fund, European Central Bank and European Commission, collectively known as the troika, are now in Athens evaluating reforms before the funds are released.

Jean-Claude Juncker, Luxembourg's prime minister who also heads the group of eurozone finance ministers, said he expects the troika evaluation to be ready by Oct. 24.

"When those reports are with us, we will decide, and I think we will decide positively," Juncker told German TV Phoenix.

Greek government spokesman Ilias Mosialos told state TV that the next batch is "assured" as long as the government follows through with public sector reforms and spending cuts.

The Greek economy is expected to contract 5.5 percent this year and many in the markets expect the government to eventually default on its massive debt, despite Venizelos' assurances that Greece will meet its commitments.

It's feared a disorderly Greek default would wreak financial havoc, particularly among Europe's banks, that could trigger another global recession.

"A Greek sovereign default at the moment would be the worst case because it would have devastating domino effects, not only for the eurozone but it would cause the entire world financial system to waver," Juncker said.

Before heading to Athens, Roesler said the short-term eurozone rescue measures aren't enough in themselves to overcome all the problems.

"Multibillion-euro investments shouldn't be expected immediately, but it is necessary to help build up the infrastructure and economic structure — because there are two components to the crisis, on one hand the debt, on the other hand the lack of economic competitiveness," Roesler told Germany's ZDF television.

Meanwhile, Greece's Deputy Minister of Environment, Energy and Climate Change Yiannis Maniatis said the government has approved a search for offshore hydrocarbon deposits in three areas in the north and southwest of the country with an estimated combined quantity of 250 million barrels.

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Theodora Tongas and Menelaos Hadjicostis in Athens, and Geir Moulson and Juergen Baetz in Berlin, contributed.