Greek Prime Minister George Papandreou heads to Berlin on Friday to seek support from Angela Merkel, leader of the euro zone's biggest economy, in his struggle to tackle his country's debt crisis. Greece drew strong demand for a bond issue on Thursday, just one day after his government unveiled a 4.8 billion-euro package of austerity measures, but markets are still nervous about the prospect of a Greek bankruptcy and the impact on the euro zone.
Merkel, along with the European Commission, European Central Bank and other EU governments, has welcomed Greece's plans, but she has also dampened expectations that a rescue deal will be announced on Friday, saying financial aid is not on the table.
The German chancellor has insisted Greece must solve its own problems and has been reluctant to offer aid to Athens, not least as most Germans oppose the idea of taxpayers bailing out Greeks who they think have been living beyond their means for years.
Her cautious approach, and even greater hostility from her Free Democrat (FDP) coalition partners, has stoked tensions between the two nations. Some Greek lawmakers have even demanded Germans pay reparations for the Nazi occupation.
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.
CONTINGENCY PLANS
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.
The two leaders plan to hold a news conference at about 6.30 p.m. (1730 GMT). On Sunday, Papandreou meets French President Nikolas Sarkozy before heading to the United States.
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.
Papandreou faces public opposition to his austerity measures. Greece's main private and public sector unions have called a 3-hour strike for Friday, when parliament will enact the latest package under an emergency procedure.
Greece has said it may turn to the IMF if it does not get support from the euro zone but many European politicians, including German Finance Minister Wolfgang Schaeuble, have voiced strong opposition to that idea.
(Editing by Robin Pomeroy)
