EU vows to support Greece as IMF bailout is an option
The European Union's executive reassured Greece yesterday that the bloc was ready to help Athens overcome its financial problems but provided no details of how this would be achieved.
"The European Commission has been actively working with euro area member states on designing a mechanism of co-ordinated assistance," said European Commission President Jose Manuel Barroso said.
Speaking after talks with Greek Prime Minister George Papandreou, Mr Barroso said the situation had calmed down in Greece, where a swelling budget deficit has caused fears of a default, tensions in the eurozone and talk about an EU bailout.
Mr Papandreou said Athens counted on an EU or eurozone aid programme being approved if necessary to help his country, but did not rule out other options such as seeking aid from the International Monetary Fund.
"We have left all options open but we expect the eurozone can deal with this possibility, which might never occur," he told a joint news conference.
He said he might have to seek other solutions if borrowing costs become unbearable for Greece. He also vowed to push full-steam ahead with his government's austerity programme, despite the pain it causes the Greek people.
He added that Greece's problems should pave the way for strengthening economic policy coordination in the eurozone.
Mr Barroso said the Commission would propose reinforcing such co-operation next month.
Responding to suggestions from German Chancellor Angela Merkel that a way should be found to exclude a country from the eurozone, Mr Papandreou said his country would not leave the 16-nation currency area.
"Certainly there is zero possibility of (Greece) leaving the eurozone," he said.
Greece hopes EU leaders will approve an aid mechanism at a summit next week after the bloc's finance ministers discussed the issue this week.
But diplomats say some countries, especially Germany, the EU's biggest paymaster, are wary of making any promises.
EU nations have been slow to pledge concrete help for Greece and are at a March 25-26 meeting of EU leaders to consider aid from individual nations if Greece asks for help.
Mr Papandreou said even agreeing this blueprint could encourage markets to lower the "unreasonably high interest rate which is over 6pc" that they are charging to take on Greek debt, which they see as high risk of a default.
A government spokesman, George Petalotis, also said next week's EU summit will be crucial, as the country struggles to reduce a bloated budget deficit and public debt.
"I believe the summit is when it will become evident whether the European partners want to support a country ... or whether we have to resort to some other solution," Mr Petalotis said.
"But if the borrowing conditions, when we need to borrow, are not expected to be those that we want, (IMF funding) is a possibility which we certainly can follow."
A eurozone member knocking on the IMF door is unprecedented and embarrassing for the 16-nation bloc.