EU summit won't yield quick fix, Merkel says

German Chancellor Angela Merkel has dismissed any chance that the upcoming European Union leaders' summit on Greece would produce a quick and comprehensive fix to Europe's debt crisis.
German Chancellor Angela Merkel said at a media conference in Hannover Tuesday that anyone expecting a quick fix to Europe's debt crisis at the EU summit Thursday doesn't understand the size of the challenge. (Matthias Schrader/Associated Press)

German Chancellor Angela Merkel has dismissed any chance that the upcoming European Union leaders' summit on Greece would produce a quick and comprehensive fix to Europe's debt crisis.

Merkel said Tuesday that there wouldn't be anything as "spectacular" as a deal to re-write the terms of Greek debt at Thursday's conference in Brussels.

Instead, the leader of Europe's biggest economy said the meeting must produce agreement on a "controlled process of successive steps ... aiming at finally getting to the cause of the problem: The issue of reducing Greece's debt and the issue of raising its competitiveness."

Any politician who hopes for a quick fix "has not understood the dimension and the tasks we are facing," Merkel said in Hannover.

Those who promise such a quick solution are either careless or have lost patience, she added. "Either way, that is not good."

Merkel's remarks came as Greece's finance minister claimed that a European debt deal is "attainable" on Thursday.

"Reaching a solution is attainable because this solution does not only include Greece," Evangelos Venizelos told The Associated Press in an interview late Monday.

"At issue is the euro and the resilience of the euro zone. That is why protection of Greece is a self defence mechanism for the euro zone. That will help us avoid a domino effect."

Merkel insisted that tackling the debt crisis was a "historical task" because Europe could no longer be conceived without the euro, which is currently used by more than 300 million people in 17 of the bloc's 27 nations.

The summit will consider another bailout package for Greece, which already received emergency loans of more than $154 billion Cdn. last year. Merkel has insisted Greece's private creditors — including German and French banks — should share part of the burden of the next bailout through a "voluntary" contribution, but she and the European Central Bank have opposed forcing losses upon creditors.

Analysts have warned that if EU governments force private creditors to accept renegotiated terms for the debt of countries struggling to meet their obligations, then that could rattle financial markets and lead to much higher interest rates generally in the region.

In turn, that could possibly force defaults in Portugal and Ireland, which have also received an emergency loan package from the EU, the ECB and the International Monetary Fund.

Borrowing rates in larger euro zone members, such as Italy and Spain, have risen alarmingly in recent days.

Rate increases result of speculative 'attacks'

Venizelos said that was the result of bets against those countries and the euro by financial speculators.

"(We are witnessing) organized attacks on countries with very good macroeconomic data, such as Italy for example," he said.

"There is no panic, this is a very cool-headed and well-organized attack."

Greece is being kept afloat by the $154 billion in emergency loans from other euro zone members and the International Monetary Fund, and will require a second bailout expected to involve a similar amount.

Although locked out of bond markets by high interest rates, Athens is trying to maintain a market presence through regular treasury bill issues and on Tuesday saw its borrowing costs fall slightly in a sale of 13-week bills that raised $2.27 billion.

The auction was three times oversubscribed, carrying an interest rate of 4.58 per cent — down from 4.62 per cent at a similar auction in June.

"We want a solution that makes our national debt sustainable ... guarantees Greece's borrowing needs until mid-2014 when we foresee our return to the markets, and guarantees the liquidity of Greek banks," Venizelos said.

With files from The Associated Press