Greek crisis: PM George Papandreou cancels US visit

Greek PM George Papandreou in parliament - 15 September
Image caption The government said Mr Papandreou wanted to ensure commitments were fulfilled

Greek Prime Minister George Papandreou has cancelled a trip to the US as fears over the country's debt crisis mount.

His office said he had decided to return as "next week is particularly crucial" in efforts to secure the country's next bailout loan.

Greek newspaper Vima said it came after lenders demanded new measures including the dismissal of 20,000 more state employees than previously proposed.

Mr Papandreou had planned to attend the UN General Assembly and IMF meetings.

Cash crisis

Greek media said he took the decision after consultations with Finance Minister Evangelos Venizelos.

The decision comes a day after eurozone ministers delayed a decision on releasing more money to Greece.

Eurozone leaders will now decide in October whether to release the next 8bn euros ($11bn; £7bn).

The German finance minister, Wolfgang Schaeuble, warned that no money would be forthcoming if the country does not stick to planned cuts in its borrowing.

"Membership in a monetary union is an opportunity, but also a heavy burden," he told German Sunday newspaper Bild am Sonntag.

"The Greeks must decide whether they want to bear this burden."

The Greek government is expected to run out of cash to pay for public services by mid-October if it does not receive further loans.

The BBC's Chris Morris says there are different views within the zone about whether Greece has done enough to deserve further loans.

'Fiscal measures'

Mr Papandreou was on his way back to Greece from London after cancelling his onward trip to New York, media reports said.

"The prime minister had decided to postpone his planned visit to the United States because next week is particularly crucial for addressing the decisions taken on 21 July in the eurozone and for the initiatives that Greece must take," a statement from his office said.

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Eurozone leaders decided on a second bailout of 109bn euros for Greece at a Brussels meeting in July. It is still receiving the initial 110bn-euro bailout, agreed in May last year, in tranches.

An official said Mr Papandreou cancelled the visit to focus on fiscal measures which were key to securing the loans.

"The prime minister judged that he should not be away. He wants to ensure that all of Greece's commitments [to its EU partners] are fulfilled," government spokesman Ilias Mossialos told Reuters news agency.

October's loan decision will be based on assessments by the three lenders, the European Commission, the IMF and the European Central Bank (ECB).

There are concerns they may rule that Greece has fallen behind on its spending cuts targets - the government was forced to introduce a property tax amid fears prompted by the recession that it would miss its target of capping its budget to 7.6% of GDP.

Mr Venizelos is expected to hold a teleconference with the three lenders on Monday.

Demands that Greece accelerate its austerity plans, and divisions among governments and policymakers over support for indebted eurozone members, have sparked turmoil in the financial markets.

But the head of the Eurogroup of ministers, Jean-Claude Juncker, said Greece was making "significant progress" and welcomed Athens' commitment to the austerity programme.

Germans 'isolated'

Meanwhile, German Chancellor Angela Merkel has continued to face dissent within her governing coalition over whether Greece should be made to default on its debts.

Image caption Philip Roesler has ruffled Ms Merkel's feathers by openly calling for an "orderly bankruptcy" of Greece

The Economy Minister, Philip Roesler, who is leader of junior coalition partner, the Free Democrats, has repeated calls for an "orderly bankruptcy" for the Greek government to help it reduce its heavy debtload.

Mr Roesler has been criticised by government colleagues from Ms Merkel's CDU party, but is under pressure from his own party after a string of dreadful results in recent regional elections in Germany.

On Saturday, he was defended by another coalition partner - Horst Seehofer, sister of the CSU - who told German magazine der Spiegel that a Greek exit from the euro should be prepared for, in case Athens failed to deliver on promises to cut its borrowing.

Meanwhile, in a separate interview with der Spiegel, Bundesbank head Jens Weidmann criticised the ECB's role in buying up debts of the southern European governments, in order to reduce their borrowing costs.

The Bundesbank - Germany's central bank - is subordinate to the ECB within the euro.

Mr Weidmann said he and other Germans feared the debt purchases put the ECB itself at risk, and pointed out that German taxpayers would have to pay 27% of the cost of recapitalising the ECB if these debts went bad.

He said Germans at the central bank had become isolated over the issue, outvoted by non-German colleagues.

Axel Weber, Mr Weidmann's predecessor at the Bundesbank, resigned in February over the same issue, while Mr Weidmann confirmed that it was also the reason for the resignation earlier this month of ECB chief economist Juergen Stark, another German.