Crisis Is 'Systemic' for Europe: Greek Finance Minister

Greek Finance Minister George Papanconstantinou sought to reassure investors over the country’s debt burden on Tuesday, saying spreads between Greek and German bonds were high because of broader market turbulence rather than a real threat of default.

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“Our spreads remain where they are because of the broader turbulence of the European markets, " Papanconstantinou told CNBC on Tuesday.

“We have all realized this is a systemic issue for Europe,” he added.

The spread between Greek and German 10-year bonds has reached its highest level since Greece joined the euro, rising above 10 percent.

Papanconstantinou said he expected to see a “major decision” in the next two months which would “once and for all settle the issue of the sustainability of debt in the euro zone”.

EU leaders plan to introduce a permanent bailout mechanism in 2013, a move which required a treaty amendment that makes it possible to aid euro zone members in financial difficulties.

It will be activated when the European Financial Stability Facility, used for Greece and Ireland, expires.

“All the major mechanisms that need to be put on table will be there to convince the markets that (the) euro zone will defend itself, will defend its currency, will defend the countries that do what they have to do to be fiscally responsible and also competitive in the European common currency area,” Papanconstantinou said.

Earlier on Tuesday, Greece sold 1.95 billion euros ($2.52 billion) of six-month T-bills. The yield was 8 basis points higher, at 4.9 percent, from a similar auction in November.

- Watch the interview with Papanconstantinou above.