European officials deny speculations about Greek default

The Associated Press

ATHENS, Greece — German Chancellor Angela Merkel on Tuesday sought to calm market fears that Greece is heading for a chaotic default on its debts as Europe struggles to contain a crippling financial crisis.

Her comments came a day after her deputy raised the possibility of a default and ahead of another telephone discussion between Greece’s finance minister and his German counterpart.

“I think we will do Greece the greatest favor by not speculating much but instead encouraging Greece to implement the commitments it has made,” Merkel said.

Fears of an imminent Greek default have pushed interest rates on the country’s 10-year government bonds up further Tuesday to a new record of more than 24 percent, even though Merkel sounded a note of optimism regarding Greece’s chances of getting the next batch of bailout cash from the so-called troika — the European Commission, the European Central Bank and the International Monetary Fund.

“Everything that I hear from Greece is that the Greek government has hopefully understood the signs of the time and is now doing the things that are on the daily agenda,” Merkel said. “The fact that the troika is returning means that Greece has started doing some things that need to be done.”

Merkel also warned of the perils of an “uncontrolled” Greek bankruptcy.

“I have said ‘if the euro fails, Europe fails’ — that applies here, and therefore, everyone should very carefully weigh their words,” she said. “What we don’t need is unrest in the finance markets.”

Merkel suggested that an orderly default could not come any time soon, noting there was not even a mechanism currently in place for a eurozone nation to default. The future permanent European Stability Mechanism — the eurozone’s planned bailout fund — will come into force in 2013.

Greece is relying on international rescue loans to remain solvent. But lagging efforts to tame a bloated budget deficit and enforce reforms are now threatening that lifeline, which is conditional on fiscal progress.

Prime Minister George Papandreou was having what state NET TV called an “emergency meeting” with his finance chief, Evangelos Venizelos on Tuesday.

Greece is trying to convince international creditors that it deserves to get the next, sixth tranche of money due from a bailout fund, and Venizelos is to speak Tuesday evening with German finance minister Wolfgang Schaeuble. A Greek official said the two will resume a 25-minute telephone conversation initiated by Venizelos the previous day.

Government spokesman Elias Mossialos said late Tuesday that Greece will get the bailout money.

“We will get the sixth tranche,” Mossialos told Alpha TV. “It will be disbursed in October,” he said, adding that Greece currently has enough cash to last it until the end of October.