Obama to urge Greece on fiscal stability

President Barack Obama was yesterday set to tell George Papandreou, Greek prime minister, that Greece's main task was to rebuild its public finances in a meeting at the White House.

Speaking shortly before the talks, a senior US administration official said: "The central task before the Greek government is to continue to move forward on their plans to restore fiscal stability and growth to its economy. We commend them for the bold steps they've already taken and have confidence that their European partners will support them on this difficult road."

Mr Papandreou was expected to seek the backing of Barack Obama, the US president, and Tim Geithner, Treasury secretary, for tighter regulation of financial instruments by governments in the G20 group of countries.

"We need clear rules on shorts, naked shorts, and credit default swaps," Mr Papandreou said in a speech on Monday to the Brookings Institution, a Washington think-tank.

"I hope there will be a positive response from this side of the Atlantic," he added.

The US argued that its financial regulatory reform bill - which is being discussed in Congress - would help tackle the problem.

"The president has presented a comprehensive plan to reform the financial system and end 'too big to fail'," a senior Obama administration official said.

The president's plan would require more transparent trading and central clearing for standardised derivatives.

That reform would also give regulators enhanced tools to crack down on market manipulation and abuse through position limits, business conduct rules and tough prudential requirements, the official said.

Greece backs the idea of a European Monetary Fund as a potential life-belt if its debt crisis is prolonged or if market pressures are renewed at some point in the future, a Greek official said yesterday.

"Support from European partners is key in this kind of situation. An institutional format such as an EMF would be an advantage for us or any other small eurozone country that finds itself in difficulty," the official said.

Mr Papandreou's visit to Washington coincided with the celebration of Greek independence day, and he also went to Capitol Hill to meet with congressional leaders.

"Prime minister Papandreou is to be commended for his courage in responding to Greece's financial and economic challenges . . The Greek people can be assured that the United States will stand with them at this critical time," said Nancy Pelosi, the Democratic speaker of the House.