Greece vows stronger budget action

Greece vowed to stay in the eurozone "for ever" on Wednesday and promised stronger budget action as the world waited for EU leaders to stop the debt crisis threatening global growth. "Greece is and will for ever be a member of the eurozone," Finance Minister Evangelos Venizelos told parliament after EU and IMF auditors agreed overnight to resume work on whether to release rescue funds to avert Greek default next month. "We will do anything, we will not place at risk the fate of the country and its place in the eurozone," the minister said. He said: "More measures are needed. We are negotiating not only the budgets for 2011 and 2012 but the entire mid-term (adjustment) programme for 2013 and 2014." "The eurozone knows that the Greek problem will only be solved within the eurozone," Venizelos said, speaking of a "war for our generation" that had to be won. Auditors from the European Union said late on Tuesday that "good progress was made" and that "technical discussions will continue in Athens over the coming days." Venizelos paid tribute to the experts from the EU, European central Bank and International Monetary Fund, the so-called troika, which have imposed increasingly draconian budget measures on the Greek people. He explained: "If there was no troika control we would have foundered fiscally...it is a matter of attitude, of ability, of administrative structure, of habit, of inertia" "It is fortunate that we are under control because in this way we can achieve self-control," Venizelos added. The EU-IMF auditors will determine whether the EU and IMF release the next slice of rescue money, of 8.0 billion euros ($11.0 billion) under a first bailout last year. Greece needs the money to avert default next month which would pose serious dangers to the entire eurozone. "The danger is that the (Greek) economy and the financial sector will stop operating, this could happen without our will, it could happen by mistake, because the EU and the eurozone in particular faces enormous political, institutional and economic problems," Venizelos said. The first bailout totalled 110 billion euros. Enactment of a second bailout agreed on July 21 this year depends in part on fulfilment of the initial conditions, but the second rescue of 159 billion euros is also held up by disagreements within the EU. "There could be a delay, there could be a misfire, because we are depending on a particularly complex system," Venizelos warned. At a meeting in Poland at the weekend EU finance ministers decided to delay their judgement on releasing the 8.0 billion euros until early in October. With the decision by the auditors to resume their work, suspended on September 2 amid signals they were strongly dissatisfied with Greek progress notably on privatisations, one cloud over the eurozone has lifted slightly. Financial markets and governments around the world are on edge and calling for the EU to get a grip on the debt crisis which the IMF warned on Tuesday was one factor dragging the prospects for world growth sharply downwards. Australia is the latest country urging the EU to get on top of the problem and prevent further contagion. Portugal said that if Greece defaulted, the contagion might force it also to seek a second rescue and maybe Ireland as well. Greek ministers are now working on enacting the results of the latest talks, believed to include new action to cut back the public sector. Meanwhile in Paris, French bank BNP Paribas signalled that it might be prepared to accept a second reduction of the amount Greece repays on its debt provided that other creditors did likewise. Under the July 21 rescue, private banks agreed to give up repayments of about 50 billion euros. French bank shares fell sharply again on Wednesday, over concerns which the banks and the government say are unjustified, that they could be hard hit if the Greek crisis worsens and drags down further bonds issued by some other eurozone countries and notably Greece. Some investment funds had already cut back on lending dollars to these banks, causing central banks last week to make dollars available. US Treasury Secretary Timothy Geithner warned EU finance ministers in Poland at the weekend that they had to get control of their debt crisis which was posing a "catastrophic" risk to the financial system. French Budget Minister Valerie Pecresse said on Wednesday that France was not working on the basis that Greece would default. If Greece enacted measures under the July 21 framework, "it will be saved," she said. The European Commission switched tack on Tuesday, acknowledging that the IMF might be right in warning that European banks might need recapitalising to withstand resurgent strains via their holdings of government debt. And in another ominous sign of contagion, which some top EU officials have warned could cause chaos not only for the eurozone but the EU as a whole, ratings agency Standard & Poor's has downgraded Italian debt.