EU Struggles To Solve Greek Debt Crisis

Greek officials have been working with private lenders to try to reduce their debt-load. Meanwhile European Union officials are in Brussels to deal with the financial crisis. Renee Montagne talks to Zanny Minton Beddoes, an editor at The Economist, for an update on the crisis.

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RENEE MONTAGNE, HOST:

In Brussels, European Union heads of state are gathered for yet another summit on the crisis in their region: debt. For a look at what tops their agenda we called Zanny Minton Beddoes. She's economics editor at The Economist magazine. Good morning.

ZANNY MINTON BEDDOES: Good morning.

MONTAGNE: Now apparently top European officials are hoping to agree on some measures to control deficits, also to set up a rescue fund. How significant are these, and how likely are they to get agreed upon?

BEDDOES: Well, as you say, it's yet another meeting in a long list of European summits, but I think top of the agenda at this meeting, is to get agreement on a formal treaty to impose stricter budget rules on countries in the eurozone. Now that's not going to do anything to solve the current mess, but it's something that Germany, in particular, thinks is essential to prevent future disasters.

And since Germany is the paymaster of the eurozone, if you will, it's the price necessary to get German support for a bigger rescue fund today. And I think if the German's get a tough fiscal treaty today, they'll be more inclined to go along with the second item on the agenda, which is to boost the rescue funds.

The Germans say if we're going to have bigger rescue funds, which we're not very keen on, we want stricter rules before we agree to more money. And I think that's what the really big debate is going to be about today.

MONTAGNE: I understand, though, there's also a bit of a flap between Germany and Greece, the Greeks being furious about a German suggestion that the EU install a budget overseer in Athens to keep an eye on things there. Why though, are the Greeks so furious about that?

BEDDOES: Well, that's absolutely right. Greece is very, very close to a deal with its large group of private creditors, mainly banks. There's been negotiations going on for months about crossing the debt burden owed to the private creditors. And it looks like in the next couple of days there will be an agreement that the Greeks also need to agree the terms of more rescue money with the International Monetary Fund and with their European rescuers.

And even with the reduction in private debt that this debt deal might bring, the Greeks are going to need more money. And the Germans are very reluctant to provide more money without much, much tougher reforms on Greece. They basically think the Greeks have done very little reform and that the Greeks are just assuming there will be a drip feed of help coming from northern Europe and the Germans are fed up with it.

So over the weekend, a paper was leaked from the German Finance Ministry, which suggested that the Germans wanted to install a kind of European commissioner to oversee Greece's budget, basically taking away its sovereignty over budget decisions.

Not surprisingly, the reaction, I think, was furious, you know. This is our sovereignty. What on Earth are you doing in it? It really raised an exacerbated tension between Athens and Germany. And I think that we're going to see that becoming a really big part of the drama over the next few weeks. But if Greece doesn't get a new rescue package, then it's going to default on March the 20th, when it needs to pay a 14 billion euro bond payment.

MONTAGNE: Just briefly, what about the rest of region? What strikes you as being a key thing that will be talked about here?

BEDDOES: Well, I think that the, sort of, modest stability that we seem to have got in the Euro crisis right now, the biggest risk to that is Greece. I think beyond that the concern is, you know, countries like Italy are really showing that they want to do some reforms.

Can they get enough relief on their bond spread, on the bills that they have to pay to borrow money, to show their people that those reforms are yielding results? And that is the tension between the Germans demand, again, for more reforms and not so much rescue money, and the need in the Italian and Spanish eyes, to have more relief from the rescuers to enable the politics of their reforms to work.

MONTAGNE: Zanny Minton Beddoes of The Economist magazine, thanks very much for joining us.

BEDDOES: My pleasure.

(SOUNDBITE OF MUSIC)

MONTAGNE: This is NPR News.

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