IMF proposal causes European divide to widen over Greek debt
THE split between Europe's leaders over aid to Greece widened yesterday as Germany softened its opposition to a bailout by the International Monetary Fund (IMF) and France insisted on a European solution to the crisis.
As Berlin and Paris bickered over the politics of IMF intervention in the eurozone, an outspoken board member of Germany's central bank said that Greece had not done enough to mend its finances.
Asked what Greece should do if it could not refinance its debt, Thilo Sarrazin said: "Then it should do what every defaulter has to do and file for insolvency." The European Commission urged member states yesterday to make a political commitment to a standby rescue plan.
A summit meeting in Brussels next week will address Greek warnings that soaring borrowing costs may jeopardise its efforts to cuts its budget deficit. Greece threatened this week to call on the IMF for aid if Europe failed to come up with concrete proposals for a rescue package.
Olli Rehn, the Economic and Monetary Affairs Commissioner, said the European Union must "come to a more specific political conclusion about the European framework for co-ordinated and conditional action, if needed and required".
The French Government waded in to support Greece, however, stating that the priority was to find a European solution to the crisis, suggesting it was premature to talk about an IMF loan.
The euro fell to its lowest level against the dollar in more than two-weeks, pressured by persistent worries about Greece's debt problems as traders waited to see if the country can secure aid from eurozone members next week.
The European single currency had weakened on Thursday as the markets fretted on the continuing uncertainty. (© The Times, London)