- The Washington Times - Sunday, May 16, 2010

ATHENS (AP) — Greek Prime Minister George Papandreou declared he is not ruling out taking legal action against U.S. investment banks for their role in creating the spiraling Greek debt crisis.

Both the Greek government and its citizens have blamed international banks for fanning the flames of the debt crisis with comments about Greece’s likely default, actions that are causing the country’s borrowing costs to soar.

“I wouldn’t rule out that (legal action) might be a recourse. But we need to let due process (take its course) and then make our judgments once we get the results from the investigations,” Mr. Papandreou said in a CNN interview broadcast Sunday.

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He did not elaborate further on any actions against U.S. banks.

Mr. Papandreou also said a parliamentary investigation will examine the rapid swelling of Greece’s debt and international banking practices to examine whether the financial sector engaged in “fraud and lack of transparency.”

The European Union and the International Monetary fund have approved a 110 billion euro ($136 billion) bailout package for Greece. In addition, European nations have created a 750 billion euro ($1 trillion) rescue package to protect the euro, the common currency of 16 European nations, including Greece.

The Greek leader also urged more regulation of the markets, which, in his view, now are betting against the European governments that have poured billions into them since the global financial crisis began in 2008.

Some European governments plan to push for tighter regulation of hedge funds this week — a move opposed by Britain, home to the financial hub of London.

Mr. Papandreou also tried to counter criticism, expressed mainly in Germany, that Greeks are getting a free ride and rejected widespread international skepticism about Greece’s ability to pay back its loans. Greek debt is scheduled to exceed 140 percent of its economic output in 2012.

“We are paying back the loans we are getting … this saying that ‘we are handing out money to Greece’ is not true,” he said on the CNN show “Fareed Zakaria GPS.” ”It is very easy to scapegoat Greece, and Greece bashing very often gets entangled in regional politics.”

He insisted his government has made the unpopular but necessary decision to implement austerity measures.

“We are ready to make the changes … we have made our mistakes. We are living up to this responsibility, but at the same time, give us a chance,” Mr. Papandreou said. Still, another top German economist expressed doubts Sunday about Greece’s ability to repay.

Deutsche Bank AG Chief Executive Josef Ackermann created an uproar Thursday for mentioning the possibility that Greece might have to restructure its debt, but Dekabank’s chief economist, Ulrich Kater, was quoted as agreeing with him Sunday in the German news website Handelsblatt.

“It will be very, very difficult for Greece to orderly repay its debt,” Mr. Kater was quoted as saying, adding that Greece’s new austerity measures and its lack of competitiveness were dooming the country’s prospects for economic growth, making debt reduction difficult.

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