Greece has announced that its debt stands at a record €300 billion during an all-party crisis meeting to calm alarm on financial markets.
The admission of the scale of the crisis came as a top official at the European Central Bank (ECB) said there could be no specific bailout from other eurozone countries, but Germany said the EU shared a common responsibility.
‘The country's debt has reached €300 billion, which is the highest level in our country's modern history,’ deputy finance minister Filippos Sahinidis told lawmakers shortly after Prime Minister George Papandreou convened the all-party crisis meeting to pull the nation together.
The newly-elected socialist premier, who is under huge pressure to slash spending, said the government was ready to ‘clean up’ its economy, having warned earlier that debt was a threat to the nation.
‘At this point a national rally is required to solve these problems,’ Mr Papandreou told Greek President Karolos Papoulias.
Mr Papandreou said that the meeting, set for next week, is aimed at ‘sending a powerful message abroad showing that we're determined to move forward, to clean up our economy and ... give hope to every Greek citizen’.
The head of the ECB Jean-Claude Trichet has called repeatedly for ‘courageous steps’ from Greece, after a series of downgrades of Greek debt amid growing alarm that the country may be heading towards bankruptcy.
In Vienna, ECB governing council member and Austrian central bank chief Ewald Nowotny, asked if Greece could become a test for the entire eurozone, replied: ‘No, I do not see this in any way’.
He said: ‘An exit or something similar from the eurozone would be totally unrealistic for Greece, and also not do-able.’
But he also warned: ‘The 'No bailout' principle is anchored in the EU treaty and has to be taken absolutely seriously. It is not possible to defuse the problem here through direct financing.’
In Bonn, the president of the group of the 16 euro zone finance ministers, Jean-Claude Juncker, said the budget situation in Greece was ‘tense’ but the country should avoid bankruptcy.
The crisis was to be debated by EU leaders at a summit in Brussels.
‘It is not formally on the agenda, but I guess prime ministers will relate to the matter informally, because the situation in Greece is very serious,’ said Swedish Foreign Minister Cecilia Malmstroem.
‘We are in a family, we try to support each other,’ she underlined.
German Chancellor Angela Merkel said the European Union shared a ‘common responsibility’ for Greece.
‘What happens in a member country influences all the others, particularly when you have a common currency,’ she said.
Greek stocks came back to life after shedding almost 10% of their value over two days following ratings agency downgrades of government debt bonds.
But official statistics released later in the day showed unemployment rising to 9.1% in September on an annual basis with over 450,000 people out of work.
Youth unemployment is high and is a highly sensitive issue. Industrial production also slumped 9.2% in October on an annual basis.
Its credibility has been damaged by the revelation that the public deficit is expected to surge to 12.7% of output this year and that debt amounts to 113% of gross domestic product.
Many analysts have warned that the crisis in Greece exposes great strains within the euro zone, and also the challenges which many European governments face in reducing budget deficits in time to satisfy markets without strangling economic recovery.
Greece's sovereign debt was downgraded on Tuesday by the international ratings agency Fitch, prompting financial market jitters.
Greek shares closed up 5.15% this evening.
