Greece's Papandreou calls for stiffer hedge fund regulation

09/03/2010

Market speculation must be reined in if a future world economic crisis is to be avoided, Greek Prime Minister George Papandreou said during a meeting with the US secretary of state.

(Reuters, BBC - 09/03/10; AP, AFP, Reuters, VOA, EurActiv, ANA-MPA, US Department of State - 08/03/10)

Secretary of State Hillary Clinton (right) and Greek Prime Minister George Papandreou shake hands after a meeting at the US State Department on Monday (March 8th). [Getty Images]

Greece is seeking political, not economic, support, Prime Minister George Papandreou said on Monday (March 8th), urging the G20 nations to impose more stringent regulations on hedge funds.

"We're not asking for money. We're not asking for bailouts," the leader of Greece's left-wing PASOK party said, following talks with US Secretary of State Hillary Clinton on the first day of his four-day visit to Washington.

Shortly after taking office in October, Papandreou's government revealed that the country's 2009 budget deficit would far exceed previous forecasts and would rise to 12.7% of GDP, more than four times the 3% EU ceiling.

The Socialists also inherited a huge public debt, which is expected to reach nearly 300 billion euros, or more than 120% of GDP, this year.

Greece has since pledged to cut its 2010 budget deficit by 4% of GDP and has imposed a series of painful measures to deal with its fiscal crisis. But concerns about the country's massive debt levels have made it more expensive for Greece to borrow funds on the international financial markets and have pushed up the price of insuring Greek debt against default.

Given the measures his country has imposed, Papandreou said on Monday, it wants only to be treated as an "equal partner" and to be able to borrow money on the international markets at the rates offered to other EU and Eurozone members.

"If we continue to borrow at very high rates ... twice, for example, the rates of Germany, that would be unsustainable within a common currency," he said at a joint press conference with Clinton.

Blaming market speculators for aggravating his country's debt woes, he also warned that failure to rein in their activities could trigger a new global financial crisis.

"An ongoing euro crisis could cause a domino effect, driving up borrowing costs for other countries with large deficits and causing volatility in bond and currency rates across the world," Papandreou said, calling for hedge funds and currency traders to be regulated more strictly.

Clinton said Washington backs the Greek government's response to the fiscal crisis.

"I know these are difficult days in Greece, but I want to commend the prime minister for his leadership in tackling the challenge that he confronted, upon taking office," she stressed. "We support Greece and the tough economic measures it is taking to address this issue."

In addition to finance, Papandreou and Clinton also discussed Cyprus, Greece's relations with Turkey, and the integration of Balkan countries into the EU. Clinton commended Papandreou for his diplomatic efforts to strengthen Athens-Ankara ties, and voiced support for a Greek initiative calling for the EU integration of all Western Balkan nations by 2014.

She praised UN-led negotiations on ending the division of Cyprus, citing the "hard work" of the Greek Cypriot and Turkish Cypriot leaders during the talks.

Papandreou is scheduled to meet with US President Barack Obama on Tuesday.