EU must back Greece or put monetary union at risk: Sarkozy

French President Nicolas Sarkozy said the European Union must support Greece or risk destroying the euro as Prime Minister George Papandreou heads for Paris to lobby support for the debt-laden country. “If we created the euro, we cannot let a country fall that is in the eurozone,” said Sarkozy yesterday before a meeting with Papandreou in Paris today. “Otherwise there was no point in creating the euro. We must support Greece because they are making an effort.”

EU leaders have so far refused to give financial aid to Greece and have ordered the government to cut its budget deficit, the EU’s highest, on its own. While Papandreou says steps taken this past week to slash the shortfall warrant more help from the EU, German Foreign Minister Guido Westerwelle said yesterday that his country is “not going to write a blank check.” Papandreou is touring Luxembourg, Berlin, Paris and Washington after his government passed a ¤4.8 billion ($6.5 billion) austerity package on March 5. German Chancellor Angela Merkel, who met him yesterday, said the question of a bailout “absolutely doesn’t arise” and the steps taken to cut the deficit make her optimistic that a rescue won’t be needed.

Sarkozy, who didn’t say financial support would be forthcoming, will meet Papandreou in the Elysee Palace around 6 pm local time. They will brief reporters afterwards.

Merkel is rebuffing any talk of a rescue even as EU nations are said to be working on a contingency bailout plan for Greece to be funded by member governments. Greece sold ¤5 billion of bonds on March 4, with investor demand more than three times the offering, the day after Papandreou announced the package of tax increases and spending cuts.

Bond Sale
The 6.25 per cent bonds Greece sold rose to about 99.4 cents on the euro to yield 6.32 per cent, compared with an issue price of 98.94 cents, according to EFG Eurobank Trading prices on Bloomberg. The risk premium that investors demand to buy Greek bonds over comparable German debt, the European benchmark, fell 4 basis points to 293 basis points.