Merkel pledge

Chancellor Angela Merkel said Tuesday that Germany was prepared to support Greece and help the country remain a part of the eurozone.

"We want a strong Greece in the euro area," the chancellor said ahead of a working dinner with visiting Greek Prime Minister George Papandreou. "Germany is ready to give all the help required as Athens implements reforms."

Merkel emphasized the importance of solidarity within the eurozone. "We are closely tied to each other through the euro. The weakness of one partner is a weakness for all."

In the same press conference, Papandreou welcomed the backing of other eurozone states and added that Greeks were making big sacrifices to ensure that a bailout to support the country succeeded.

"Where big efforts are being undertaken and big sacrifices made by the Greek people, it's very important to get signals of support from the European partners," he said.

The Greek premier's words came as his ruling Socialists forced through legislation on Tuesday to pave the way for a deeply unpopular property tax. The vote was seen as a key requirement to Greece securing an 8-billion-euro ($11 billion) loan - the next slice of the bailout package put together by the European Union and the International Monetary Fund.

Angry anti-austerity demonstrators jeered outside the parliament, where all 154 Socialists voted to push through the measure in the 300-seat assembly.

On Thursday, the German parliament is set to hold a crucial vote on a controversial package of measures to boost the eurozone rescue fund.

Slovenian lawmakers on Tuesday voted in favor of the plan, agreed by EU leaders in July, meaning that nine of the 17 eurozone nations have so far ratified the measures. They include steps to introduce greater flexibility into the 440-billion-euro ($595 billion) fund.

But the move to extend the Greek bailout deal for a third time has faced fierce opposition from German voters and sparked a rebellion among some members of Merkel's ruling coalition.

Quo vadis Greece?

The vote in Berlin also comes as officials from the European Union, the European Central Bank and the International Monetary Fund prepare to assess Greece's efforts in overhauling its state finances.

Officials are to decide whether Greece has made enough progress to allow the release of the latest installment of funds. Failure to release the funds could mean Greece would be unable to pay its bills.

Earlier in the day, the crisis was debated in the European Parliament. The parliamentary leader of the parliament's Socialist group, Martin Schulz, said it was necessary for Europe to win back confidence on two fronts.

"The loss of confidence in Europe is double," said Schulz. "We are dealing with a loss of confidence of markets as well as a loss of confidence in the taxation capabilities of governments. The basic message is that one can and must regain confidence by acting in a consistent manner."

Liberal group leader Guy Verhofstadt said the situation was increasingly serious. "From outside the EU we have the general call for no half measures as in the past 18 months, but instead for us to come up with a comprehensive, bold new plan and approach."

Reports suggest European policymakers are also considering other measures to deal with the crisis. These could include quadrupling the stability fund to about 2 trillion euros, or allowing Greece to partially default, by writing off 50 percent of the country's debt and recapitalizing banks.

Global share markets have rebounded this week on hopes of European leaders hammering out a new deal to face up to the crisis before the November meeting of G20 leaders.

Obama warning

On Monday, US President Barack Obama piled the pressure on European leaders, warning them of the need to agree on a deal to tackle a crisis that was "scaring the world."

Europe "never fully dealt with all the challenges that their banking system faced," Obama said. "It's now being compounded with what's happening in Greece."

EU Economic Affairs Commissioner Olli Rehn had said that the European Financial Stability Facility, the cornerstone of a second Greek bailout, should be given "greater strength."

However, German Finance Minister Wolfgang Schäuble has insisted there is no plan to boost the fund.

"We are giving it the tools so it can work if necessary," Schäuble said Tuesday. "Then we will use it effectively - but we do not have the intention of boosting its volume."

Schäuble also responded to comments made by Obama, denying that Europe's debt crisis was the cause of the US's financial woes.

"Even if Obama thinks the opposite, I don't think the problems of Europe are the reason for the problems of the US," said Schäuble, speaking to the European School of Management and Technology in Berlin.

Author: Joanna Impey, Richard Connor (AFP, dpa)
Editor: Martin Kuebler