As Greece's Prime Minister battled to persuade the world's media that his government was taking radical action to fix the country's public finances, the German Economics Minister said that weak states such as Greece may have a "fatal" impact on the remainder of the eurozone.
Rainer Brüderle told German MPs: "Some euro states are showing dangerous weakness. This may have fatal effects on all states in the eurozone."
Confusing the issue of whether Greece might eventually have to be rescued by the European Union (as many Europeans would prefer) or the International Monetary Fund, Mr Brüderle seemed to suggest that Greece could not expect much sympathy from him. To applause, he declared: "There should not be a collective bailout for lopsided developments at national level."
But over in Switzerland the Greek Prime Minister, George Papandreou, blamed "speculation" and unnamed financial interests with "ulterior motives" for his country's woes.
Mr Papandreou denied categorically press reports that the Greek government had had to turn to the Chinese to support their latest bond issue.
He added that there was no question, again contrary to reports in the press, that the Greeks were about to ask the French and German governments for a massive bailout loan to support their economy.
Mr Papandreou said: "This is an attack on the eurozone by certain other interests, political or financial, and often countries are being used as the weak link, if you like, of the eurozone, [by those with] ulterior motives."
He added: "We need no bilateral loans, we have never asked for bilateral loans." Asked directly if he was speaking with France or Germany about lending Greece money, he said: "No."
His remarks did little to calm markets, with the spread between Greek and benchmark German government bonds (Bunds) widening yesterday – up to 400 basis points, a record in the history of the eurozone.
Reports in Le Monde, however, suggested that while Greece has not asked for aid, the French authorities were preparing contingency plans.
Worries are also growing that the sovereign debt crisis that has hit Greece may spread to other eurozone nations with fiscal problems – Ireland, Portugal and Spain. Speaking on the same panel, the Spanish Prime Minister, Jose Luis Rodriguez Zapatero, said that "no country is going to leave the eurozone".
While pointing to waste and corruption that had occurred under the previous Greek government, Mr Papandreou admitted that the present crisis was "homemade" and that "every Greek realises the problem". He also suggested that the EU as an entity rather than national governments should issue "EU Bonds", in the same way that the US Treasury issues securities on behalf of the US states.
At almost 13 per cent of GDP, Greece has the highest budget deficit in the EU, though it is not so very much larger than the UK. The latest austerity package announced by Athens is aimed at lopping 4 percentage points off that figure, though that will still leave Greece towards the top of the borrowing league. With Greece having had to offer investors a massive 7 per cent interest rate to sell its latest debt issue, concerns persist that the debt burden may be too much for its taxpayers to bear.Reuse content