UPDATE 2-Greek, Turkish PMs meet, discuss defence cuts

* Papandreou, Erdogan meet to relaunch cooperation

* Aim to ease Aegean tensions, cut defence spending

* Business cooperation, bilateral projects on table

(Adds Erdogan, Papandreou comments)

By Michele Kambas and Dina Kyriakidou

ATHENS, May 14 (BestGrowthStock) – Long-time rivals Greece and
Turkey agreed on Friday to try and ease tensions and attempt to
cut heavy defence budgets, seeking to gain something positive
from the Greek debt crisis currently shaking the euro.

Turkish Prime Minister Tayyip Erdogan visited Athens with 10
ministers and some 80 businessmen for what both sides hailed as
a new era in ties between two NATO members who have come to the
brink of war on several occasions in the last 50 years.

Erdogan, in his first official visit to Greece since 2004,
said issues under discussion with Greek Prime Minister George
Papandreou included cuts to arms spending.

“We do not want to see the Aegean as a sea dividing us. We
want to see the Aegean as a sea of peace,” Erdogan told a news
conference alongside Papandreou.

The two sides signed 21 bilateral agreements on issues
ranging from tourism, energy and environment, to curbing illegal
migrants coming through Turkey, a major problem for Greece.

“Greece and Turkey, despite the variations in our relations,
and maybe because of this, have the duty and need to find roots
of cooperation and understanding between us. That will lead to
complete normalisation of relations,” Papandreou said.

DEFENCE CUTS

Greece’s debt crisis has given extra impetus to efforts to
improve ties with its traditional rival.

Greece spends a higher proportion of gross domestic product
on its military than any other EU member. Western officials, who
have put together a 110 billion euro ($140 billion) rescue
package for Athens, advocate cuts in Greece’s armed forces as a
way of reducing its bulging deficit.

In recent years Greek defence spending reached a high of 5.6
percent of GDP, about 13.4 billion euros. Greece has set itself
the target this year of cutting it to below 3 percent of GDP.

According to the International Strategic Studies group
Turkey spent $10.2 billion on defence in 2008 and $9.9 billion
in 2009, but its economy is forecast to grow faster than any in
the EU this year, so Ankara has less need to make cuts.

Erdogan skirted a question on what cuts to military spending
Turkey would make, perhaps indicating there had not yet been any
concrete decision.

Athens, which backs Ankara’s European Union accession
provided it meets its obligations, has made clear an improvement
in relations will hinge on Turkey showing good will in the
Aegean and in efforts to reunite the divided island of Cyprus.

Erdogan suggested a meeting between Turkey, Greece, the
Greek and Turkish sides of Cyprus, the European Union and the
United Nations could make headway towards resolving the dispute.

“We must achieve results as soon as we can. If we put
together our efforts we can have results by the end of the
year,” Erdogan said.

Greece and Turkey were nearly drawn into conflict as
recently as 1996 over an uninhabited Aegean islet, and fighter
planes from the two neighbours are still regularly engaged in
mock dog-fights in disputed Aegean airspace.

Erdogan called for the aircraft to be at least disarmed.

“The Turkish aircraft are not flying armed, but the Greek
aircraft are flying armed,” he said.

“Dog-fights should belong to the past,” said Papandreou. “We
as a country with so many islands are afraid that Turkey could
take from us a Greek island. Don’t laugh. There is a fear. Can
we push these fears away? Yes we can.”

Ties between the two neighbours have improved since 1999,
when earthquakes in both countries led to spontaneous deliveries
of aid and prompted their leaders to begin dialogue.

Stock Market Research
(Writing by Dina Kyriakidou and Jon Hemming; Editing by Matthew
Jones)

UPDATE 2-Greek, Turkish PMs meet, discuss defence cuts