BERLIN German Chancellor Angela Merkel sought Tuesday to calm market fears that Greece is heading for a chaotic default as Europe struggles to contain a crippling financial crisis.
Merkel rejected the notion that a Greek bankruptcy a possibility raised a day earlier by her deputy that spooked markets would provide a quick solution to the eurozone debt crisis.
She argued that Europe instead needs to stick to its efforts to cut budget deficits and improve its competitiveness, and that resolving the crisis would be a very long, step-by-step process.
Her comments came ahead of a teleconference today with French President Nicolas Sarkozy and Greek Prime Minister George Papandreou.
Fears of an imminent Greek default pushed interest rates on the countrys 10-year government bonds up Tuesday to a new record of more than 24 percent, although Merkel sounded optimistic regarding Greeces 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.
Representatives from the three organizations are due back in Athens soon.
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 told rbb-Inforadio.
The fact that the troika is returning means that Greece has started doing some things that need to be done.
Merkel also sought to defuse suggestions by Vice Chancellor Philipp Roesler and others that a default by Greece is a possibility.
Roesler raised on Monday the specter of an orderly insolvency in the future, a notion the Dutch finance minister indicated was being considered.
Jan Kees de Jager told Dutch financial news show RTL Z on Tuesday that his ministry was prepared or preparing for all conceivable scenarios and even the almost inconceivable scenarios.
Asked if that included a Greek default, he said It includes all likely and unlikely scenarios, but I cant tell you specifically which.
Merkel dismissed the idea that the debt crisis could evaporate with one buzzword be it eurobonds or insolvency or other words.
I am deeply convinced that wont happen, she told reporters after meeting Finnish Prime Minister Jyrki Katainen. The chancellor didnt mention Roesler but pointed to the potential dangers of untested action.
We must always keep in view that we do everything we do in a controlled way, that we know the consequences, because otherwise a situation could very quickly arise in the eurozone ... that none of us wants and that could have very, very difficult consequences for us all, Merkel said.