Debate over which countries may bail out Greece
Published 17/03/2010 | 05:00
EU leaders still have several issues to resolve over how to organise any rescue package for Greece when they meet next week, informed sources said yesterday.
Greece is already pushing eurozone member states for more details on how and when an aid package pledged by EU finance ministers on Monday would be triggered, but it is clear that critical issues have yet to be decided. One of these is whether all euro countries would contribute if it became necessary to lend to a member state that was unable to borrow on the markets.
Comments by the head of the euro finance ministers' group, Jean Claude Juncker, that all would be involved -- including Ireland -- were rejected by German Chancellor Angela Merkel, sources said.
"The trouble is that, if everyone was not involved, then no one would get involved," a source familiar with the talks said.
"But there is no political agreement on countries with deficits having to borrow more to make bilateral loans to another country."
Germany is against the idea of guaranteeing market loans, for fear of removing discipline from fiscally challenged countries such as Greece. It would insist that any bilateral loans would carry heavy interest rates in line with market rates, so that they would not be a "soft option".
"The objective would not be to provide financing at average euro area interest rates, but to safeguard financial stability in the euro area as a whole," ministers said.
Finance Minister Brian Lenihan was unavailable for comment.
Greek Finance Minister George Papaconstantinou made it clear his country had not yet asked for a bailout.
"What we asked for was political support to have access to the markets at a reasonable borrowing rate," he said.
The EU's economics chief Olli Rehn said he was satisfied the "realistic and and convincing" austerity measures would assuage markets and that it would not need a loan.