Germany pats Greece’s back, but vows to give ‘not even a single cent’

Speaking ahead of a visit by Greek Prime Minister George Papandreou, Merkel promised her moral backing but no hint of what, if any, financial aid the euro zone’s biggest economy might eventually be prepared to offer. Economy Minister Rainer Bruederle said Germany had no intention of giving Greece a single cent in aid. “The German government does not intend to give a cent,” said Bruederle, a member of the Free Democrats (FDP) who share power with Merkel’s conservatives. The FDP has led government resistance to aid for Athens. Each EU state was responsible for its own affairs and Athens had to implement its austerity plan effectively, Bruederle said.

Merkel told a news conference in Munich: “We should stand helpfully by Greece’s side.” She also welcomed the fact that the market showed strong demand for a Greek bond issue on Thursday. “The placement of the bond yesterday went very well and that is of course a good signal for the markets,” she said.

The 5 billion euro 10-year syndicated bond was more than three times oversubscribed at a price of about 6.4 percent -- twice what Berlin pays, according to banking sources. But markets are still nervous about the prospect of a Greek bankruptcy and the impact on the euro zone, while a poll by Public Issue for Skai TV showed a large majority of Greeks opposed a 4.8 billion-euro package of additional austerity measures. Most Germans oppose the idea of taxpayers bailing out Greeks who they think have been living beyond their means for years.

However, leaving Greece to fend for itself risks unnerving markets further. Athens’s troubles could then spread to other euro zone states such as Spain or Portugal -- a scenario that would deepen the crisis in the euro zone.

European government sources have said Germany and France are working on contingency plans under which state-owned financial institutions would directly purchase billions of euros in Greek bonds or offer guarantees to commercial banks that bought them.

Eurogroup Chairman Jean-Claude Juncker said euro area states would guarantee the currency zone’s stability if necessary but they were unlikely to need to, given Greece’s own efforts. “If all this were not to suffice, the euro zone would be ready to guarantee the financial stability of the euro area but I do not expect that to be necessary,” he told Deutschlandfunk radio.

Merkel and Papandreou planned to hold a news conference at about 6.30 p.m. (1730 GMT). Papandreou told Germany’s Frankfurter Allgemeine Zeitung he had never sought a bail out. “We have not asked German taxpayers to pay for our pensions and holidays,” he told Friday’s edition of the paper. “That there is European support so that we can borrow money under better conditions. That is all we need,” he added.

Clashes broke out in central Athens Friday during a protest outside parliament as lawmakers prepared to vote on austerity measures to deal with Greece’s debt crisis.

Protesters chased the ceremonial guard -- dressed in 19th century uniform -- away from the Unknown Soldier’s Tomb, threw stones and clashed with riot police, who cleared the area with tear gas and baton charges. No injuries or arrests were immediately reported.

The clashes came as about 5,000 demonstrators gathered to protest the 4.8 billion euro ($6.5 billion) package that will hike consumer taxes and slash pay for public sector workers by up to 8 percent.

Just before the attack on the two military guards and their escorting officers, during which demonstrators smashed windows and kicked the guard posts, masked youths attacked the head of Greece’s largest trade union who was addressing the crowd.

‘Greece a euro-area issue’

The head of the group of eurozone finance ministers says the Greek debt crisis is an issue for the euro area and he doesn’t support deeper involvement by the International Monetary Fund.

Jean-Claude Juncker -- who is also Luxembourg’s prime minister -- said after meeting Greek Prime Minister George Papandreou that “we have to deal with the problem as a euro area.” He said it was acceptable for the IMF to offer technical assistance. But he insisted: “as the chairman of the euro group I’d like to exclude any further involvement of the IMF.” Juncker said financial markets understand that the measures taken by Athens are “tough and credible.”