Greece's fiscal problems is not exactly my great area of expertise, but when you're invited to meet an actual head of state, you go. And so I was one of about 17 journalists who met with George Papandreou this morning at the Center for American Progress.

Here's the Reuters news write-up of the session:

WASHINGTON, March 10 (Reuters) - Greek Prime Minister George Papandreou said on Wednesday his country was working to get its fiscal house in order and wanted markets to recognize that.

Speaking at the end of his first visit to the United Sates as Greece's new leader, Papandreou said his government was not trying to "scapegoat" its problems by blaming them on market speculators.

Papandreou said European leaders such as German Chancellor Angela Merkel, French President Nicolas Sarkozy and Euro Group Chairman Jean-Claude Juncker backed Greece's push to rein in unregulated markets, such as credit default swaps, blamed for exacerbating Greece's problems by betting on its debt.

"We want to make sure that since we're doing what we have to do, we want to make sure this has the most positive impact and we don't have forces working against us," Papandreou told reporters at an event sponsored by the Center for American Progress.

That's perfectly accurate as far as I recall. It's just unfortunate that the dictates of news writing don't allow for anything descriptive.

I was struck but how soft-spoken he was. One could barely hear him sometimes. It was a bit odd, considering that he's a third generation politician. His lofty grandfather, of course, was prime minister, what, three times, I think -- emerged from the fire of the Greek civil war, then overthrown by the fascist junta in 1967, then back in power after the democratic restoration. And his father was prime minister too.

You'd think a guy with that lineage would be a bit, well, louder, anyway. But he was more like a technocrat. I count this as a plus, really.

What was striking was how a head of state of a middle-sized country, especially one in the throes of a deep crisis, has to watch every word he says when he comes to Washington DC to meet the rulers of the world and the masters of international capital. He didn't say much of genuine interest, but then if you or I were in his shoes, we wouldn't either.

For example, Ed Luce of the FT asked him to comment on the Goldman Sachs role, which the New York Times reported was rather nasty. But he wouldn't go after the firm in any way, citing a pending investigation.

I asked about the simmering cultural tensions between his nation and Germany, whose banks hold Greece's fate to some extent. I heard a report on NPR last night saying that some Greek media are broadcasting sound clips of Hitler these days, just to remind people of the things they've never liked about Germany. He said the things you'd expect him to say about the strength of the ties...

Voters in many eurozone member countries can be forgiven for thinking that the single currency has only made things worse

The euro faced its first big challenge in this banking crisis – and it failed. That is not the assertion of a British newspaper but comes from Angela Merkel, the chancellor of Germany, who admitted this week that "the sanctions we have were not good enough". She was referring to the Greek financial meltdown, but she could equally well have been talking about the fiscal crisis and violent demonstrations in Ireland in 2009 – or even the outbreak of the credit crunch over a year ago. As interconnected financial institutions across the continent tumbled like so many dominoes, the lack of a single eurozone banking watchdog (as opposed to a patchwork of national regulators from Austria to Malta to Slovenia) only made the crisis worse.

Indeed, voters in many eurozone member countries can be forgiven for thinking that the single currency has only made things worse. There has been the obvious problem inherent in a currency club that stretches across many nations in varying states of economic health, which means that Ireland, Greece and others in deep trouble can no longer devalue their punts or drachmas to make themselves more competitive but must rely instead on the more painful and certainly more unpopular task of driving down workers' wages. That was the congenital defect of the euro, but matters have been made far worse by the reluctance of individual governments to group together.

Whether Ms Merkel and her colleagues like it or not, they now share a currency and an interest rate with George Papandreou and his ministers in Athens. And yet, throughout the weeks that Greece has teetered on the abyss of economic collapse or massive political convulsions, Berlin has been unable to come out and stand behind Athens. This has nothing to do with altruism or international brotherhood, and everything to do with enlightened national self-interest. Clubs that do not hang together end up with the members being hanged separately, and in investors' minds Greece is not so different from Portugal, Italy or Spain: they all go on the target range marked Pigs. When he was Bill Clinton's treasury secretary, Larry Summers once remarked that "when markets overreact … policy needs to overreact as well". During this banking crisis, eurozone politicians have not overreacted – indeed, they have barely acted at all.

Which is why this week's suggestion from Berlin that the eurozone ought to set up its own version of the International Monetary Fund has come as such a surprise – even to other European governments. As it stands at the moment, the proposal is vaguer than a pitch on Dragons' Den, but it at least marks a recognition by Europe's anchor economy that the currency club urgently needs some more institutions if it is not to repeat the mistakes and missteps of the past few years. Ideally, an EMF (as it has inevitably become known) would...

Unsurprisingly, cash-for-Corfu has gone down in Athens like 'Up Yours Delors' did in Brussels

"We give you cash, you give us Corfu … and the Acropolis too". Bild is Germany's equivalent to the Sun, and it covered a proposal to salvage the creaking eurozone with Wapping-style tact. Unsurprisingly, cash-for-Corfu has gone down in Athens like "Up Yours Delors" did in Brussels. Even before the story broke, the overdrawn government was muttering that Berlin should say thanks for the Greek gold it stole during the war, and the very idea of surrendering Hellenic heritage in return for mere money was always likely to drive this proud nation into the sort of rage associated with losing one's marbles. But just pause and coolly consider the original suggestion of the German Euro-MP who suggested that if Athens's largesse necessitates a bailout for the continent's currency, then the Greeks might consider what they can offer in return in terms of "assets, such as uninhabited islands". Would such an exchange necessarily be such a bad thing? If Greece obtained a measure of solvency, while the Germans laid their hands on a happy sliver of history, then most economists would declare a clear gain from trade. And why not extend the approach? Instead of grandstanding with Argentina over the Falklands, Gordon Brown might exchange them for funds to fill the gaping hole in his books. And if France fancies the Channel Islands, would it be unthinkable to have the discussion? In straitened times, wider diplomacy must factor in islands, and not simply presume that each is entire of itself.

, Sat, 06 Mar 2010 00:08:02 GMT

The scheme's supporters are mostly German, other countries will be suspicious

The strangest part of all this talk about the creation of a European Monetary Fund is the timing.

Eurozone members are in the middle of dealing with the Greek debt crisis and are desperately trying to maintain the line that Greece's problems can be fixed by the adoption of austerity measures. Yet here is a proposal seemingly designed to deal with cases where austerity is not enough and bailout cash is required.

Supporters might reply that an EMF would deal with the "next Greece," rather than fix the current mess, but markets will inevitably see the message as weak and confused. No wonder speculators are salivating. No wonder Axel Weber, president of the Bundesbank, would prefer everybody to shut up. Discussions about "the institutionalisation of emergency help," he declared , are "unhelpful".

Weber has a point. Most of the voices arguing in favour of an EMF are German. Other European states – especially smaller countries – will be suspicious. They might, in theory, welcome the creation of a fund that could help in a crisis. In practice, they will view the manoeuvre as a way for Germany to impose fiscal restrictions on its neighbours while neglecting to get its consumers spending again.

If the creation of an EMF would require a new European treaty – which is German chancellor Angela Merkel's view – it is hard to see how the idea will get off the ground in the near-term. In which case, concentrate on the immediate problem.

, Tue, 09 Mar 2010 21:11:31 GMT

French president says eurozone will stand by Greece should it need financial help

The whirlwind tour of foreign capitals by the Greek prime minister, George Papandreou, to drum up support for his debt-plagued nation appeared to pay off last night after talks with Nicolas Sarkozy resulted in a pledge by the French president to stand by Greece if it needed financial support.

At a joint press conference in Paris, Sarkozy expressed his unequivocal solidarity with Greece, saying that his finance minister, Christine Lagarde, had already drawn up legislation to help the European Union's most indebted member extricate itself from its worst fiscal crisis in decades.

"Should Greece need financial help, the eurozone will stand by it," the French president said. "That's what partners are for."

Papandreou said he hoped markets would take heed of the message and allow Greece to borrow money at "logical rates" and not the exorbitant levels it has been forced to accept to service its debt in recent months.

"We have taken all the measures," he said, "measures that are very painful for the Greek people but reflect their determination [to solve this crisis]."

The Greek leader's decision to meet Sarkozy – before flying on to Washington for crunch talks with President Barack Obama tomorrow – comes against a backdrop of mounting opposition to the draconian austerity policies in Greece. The response to the financial crisis engulfing the country is turning increasingly violent, with more protests against the unprecedented deficit-cutting policies. Papandreou faces stiff opposition from trade unionists, leftists and the majority of Greeks.

The shift in public mood – evident in hand-to-hand street battles with riot police on Friday as protesters tried to storm the parliament while MPs debated the measures – was mirrored in a barrage of polls over the weekend. All showed that most Greeks believed the policies, including a rise in VAT and in electricity and fuel duties, had gone too far. Four out of five Greeks now fear a "social explosion" following the announcement of the €4.8bn (£4.3bn) austerity programme, the toughest since the second world war.

Communist militants have vowed to step up street action, while unions have announced strikes ahead of a general walkout on Thursday.

In stark contrast, bond investors are pleased with Greece's commitment to pay them back.

"In any trade there's a winner and a loser. Unfortunately for some people in Greece they're the losers and bond markets are the winners – they got the big cuts they wanted," said Gary Jenkins, a credit analyst at Evolution. "[Countries] need cash and their ability to raise money is not a given, and they have to prove themselves. It's a great shame for Greece."

Over the past three weeks, the cuts have brought down the price investors pay to protect themselves against a potential default by about 25%. The market, populated by speculative investors, such as hedge funds, had been betting that the country could default on its debt. Papandreou has been furious about these speculators adding negative sentiment, and said he would not...