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March 22, 2023

Greece belongs in currency bloc, Merkel-Sarkozy say

German Chancellor Angela Merkel and French President Nicolas Sarkozy are convinced that Greece’s future is within the euro zone, Mrs. Merkel’s spokesman said after the two leaders held a three-way conference call with Greek Prime Minister George Papandreou, WSJ reports. But Mrs. Merkel and Mr. Sarkozy also stressed during the call the need for Greece to put into practice in a strict and effective way the already-agreed measures of its austerity program under a current bailout package, the spokesman, Steffen Seibert, said. That is also necessary for a return of the Greek economy to sustainable growth, Mrs. Merkel and Mr. Sarkozy agreed, according to the spokesman’s statement. The two leaders also said that in order to guarantee the stability of the euro zone, it is essential to put into practice the decisions taken by euro-zone leaders at a July 21 summit.

Under the circumstances, Britain’s FTSE 100 rallied for a third day on Thursday after Sarkozy-Merkel said they were ‘convinced’ Greece would stay in the eurozone, citywire.co.uk informs. Ulrich Leuchtmann, strategist at Commerzbank, said the statement had clarified, for now, that the debate about aid for Greece was not about the country leaving the euro. He exclaimed: ‘It cannot be repeated frequently enough: an insolvent country can also remain in the eurozone!’ Other stock markets in Europe also advanced on the back of the Franco-German support for Greece: Germany’s DAX index was up 2.26%  to 5,461; France’s CAC 40 index climbed 1.7% to 2,999; and the FTSEurofirst 300 index of top European shares improved 1.44% to 926.Gold prices eased 0.7% to $1,808 as investor demand for the perceived safe haven asset weakened. And the euro edged up 0.2% versus the dollar to USD 1.377, following Wednesday’s gains, while the yield – or implied interest rate – on benchmark Italian 10-year government bonds dropped four basis points to 5.58%. Nonetheless, Kit Juckes, strategist at Société Générale, warned: ‘Skepticism that a country with an imploding economy can really deliver on austerity is only natural and I find fear that European integration would be undone by a default by one of its smallest members either silly, or terrifying.’

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