France Favors Voluntary PSI For Greece,Ready To Boost EFSFM
PARIS (MNI) -
France continues to favor "voluntary" participation of creditors in a rollover of Greek debt and would back an enlargement of the EFSF rescue fund if necessary, Prime Minister Francois Fillon said Tuesday.
Fillon warned in a radio interview against panic, noting that European leaders had managed in the past to come up with solutions to the succession of crises triggered by the recession.
"Yes, it's slow. Yes, it's difficult," he conceded. "But we advance each time."
Debt levels are "no longer sustainable, and all European states must make efforts to reduce public spending," Fillon said. "At the same time, we must not give in to the panic that periodically seizes the markets, which sometimes react more with emotion than with reason."
"With a bit of hindsight, we see that since the start of the economic and financial crisis we have always been able to find solutions," he said, citing the regulation of financial markets and the payment problems of Ireland and Portugal.
Fillon said the euro itself was not under attack, since it stands higher in foreign exchange markets than at its launch -- and higher than some in Europe would prefer.
The current challenge is Greece, he said. It order to deal with the "catastrophic" financial situation caused by errors of the past, Athens "must make efforts to reduce its public outlays. We must recognize that it is doing so." Its Eurozone partners must also continue to demonstrate "solidarity".
The participation of the private sector in the resolution of Greece's debt problems must take place "on a voluntary basis, because anything that looks like a credit event could trigger a new financial crisis, as was the case with the US crisis and the collapse of Lehman Brothers," Fillon said. "And we really don't need another financial crisis."
The E440 billion EFSF rescue fund "will be enlarged, if it needs to be enlarged," he said.
France, for its part, "is doing everything in its power to reduce public spending" and has preserved its triple-A credit rating, the prime minister said.
Still, it is important that strict budget rules favoring a return to balanced public finances be anchored in the national constitution, he argued. The Senate agreed Monday on the text of the constitutional amendment already passed by the National Assembly that would require each new government to set down in advance how quickly it intends to reduce the deficit over the course of its mandate, he noted.
While the amendment does not set specific deficit targets or a deadline for balanced finances -- and in this sense has less bite the EU's Stability Pact -- the government nevertheless hopes that it will give greater assurance to financial markets that fiscal consolidation will be pursued when a new government takes office.
However, the current center-left coalition does not have enough votes itself for the three-fifths majority of the two houses of parliament needed to amend the constitution. The opposition Socialist Party is reluctant tie its hands and offer a legislative victory to a government it intends to replace in 2012.
"The Socialists will have to face their responsibility," Fillon said.