US supports Greece crisis measures, PM says

Greek Prime Minister George Papandreou said U.S. President Barack Obama expressed support for measures being taken to deal with Greece’s financial crisis.

Papandreou said after meeting with Obama at the White House on Tuesday that he also got a “positive response” about European initiatives to curb market speculation. The issue will be “high on the agenda” at the next meeting of the Group of 20 nations, he said.

“We’re not asking for a bailout, we’re not asking for financial help from anyone,” Papandreou told reporters. “What we are doing is first of all revamping our own economy. We are taking measures to put our economy on the right path.”

Papandreou said he had described to the U.S. president the “necessary structural changes” he’s making in the Greek economy, including cutting government spending.

European Commission President Jose Barroso said on Tuesday the 27-nation bloc will consider banning “purely speculative” credit-default swaps, and German Chancellor Angela Merkel called for a crackdown on derivatives trading to prevent a rerun of the economic turmoil in Greece that hurt the euro and also boosted financing costs in other high-deficit countries such as Portugal and Spain.

Papandreou warned in a speech earlier this week that the crisis in his country posed financial risks to the U.S. as well as to the EU. The euro is down about 5 percent this year against the dollar partly because of concern that a Greek default would destabilize the 16-nations sharing the euro.

Economies in the euro region grew 0.1 percent in the fourth quarter of 2009, and steps taken to stem the fiscal crisis may impede efforts to spur greater growth.

That, in turn, may act as a drag on the U.S. economy and impede Obama’s efforts to bring down the country’s unemployment rate, which was 9.7 percent in February, down from 10 percent in December.

Obama’s spokesman, Robert Gibbs, said the administration believes the European Union should take the lead in dealing with the Greek crisis.

“This is an issue for the European Union,” Gibbs said at a briefing as Papandreou and Obama met. “We believe they have and possess the capabilities to solve that.”

Risk perception slightly better:

The risk premium investors demand to buy Greek 10-year debt over comparable German bonds, the European benchmark, fell 1 basis point to 313 basis points on Wednesday. That is down from an 11-year high of 405 basis points on Jan. 28, though still more than twice the level at the start of November. Spreads on Spanish and Portuguese bonds have also widened.

Investors had been growing less skittish after Greece sold 5 billion euros ($6.8 billion) of bonds last week after passing 4.8 billion euros of additional budget cuts.

Papandreou said the new cuts, the third package this year, would insure the government met is pledge to trim the EU’s highest deficit, which reached 12.7 percent of gross domestic product last year, to 8.7 percent in 2010. The bond sale helped ease concern that Greece would struggle to pay back 20 billion euros of debt maturing in April and May.

“For Greece, the problem is completely over,” former European Commission President Romano Prodi said in an interview in Shanghai. “I don’t see any other case now in Europe. I don’t think there is any reason to think the euro system will collapse or will suffer greatly because of Greece.”

Papandreou said “unprincipled speculators” are liable to spark a new global financial meltdown. He compared investors buying protection on underlying assets they don’t own - so-called naked swaps - to someone taking out fire insurance on a neighbor’s house. They then have an incentive to burn it down to collect, he said.