EU leaders play down IMF-style rescue plan for Greece
ANY European rescue fund would not help Greece in its present difficulties, EU leaders made clear yesterday, but the idea may take shape in the longer term.
There will clearly be opposition to the suggestion of a European Monetary Fund, similar to the assistance provided by the IMF (International Monetary Fund).
The head of the German Bundesbank and member of the ECB Governing Council, Axel Weber, said he would object to the establishment of such a fund to provide emergency financial aid to countries.
"I don't like to comment on things that aren't yet clear," Mr Weber, who is due to visit Dublin today, told reporters in Frankfurt.
"Any discussion about institutionalisation of emergency aid is failing to get to the point. If the proposal is about lending, I don't see how this is compatible with European treaties," Mr Weber added.
"If it is about the prevention of deficits, it's a very good idea. If it's about strengthening surveillance, it's okay."
His comments follow those of German ECB executive director Juergen Stark, who said an EMF risked encouraging governments to pursue easy fiscal policies knowing they would be saved if they risked defaulting on their debts.
German Chancellor Angela Merkel has conceded that an EMF would require a new treaty, because the Maastricht agreement forbids bailouts of euro countries with debt problems, but she has not ruled out the possibility.
Ms Merkel met Jean-Claude Juncker, chairman of the Eurogroup of euro-area finance ministers, yesterday and both said afterwards that Greece did not need financial support.
"The Greek government's programme will be strong enough to eliminate any element of irrational behaviour in financial markets," Mr Juncker said.
Mr Weber noted that the Athens deficit-cutting plans would get Greece within euro area budgetary rules before Germany.
French Finance Minister Christine Lagarde said the idea of such an EU lender of last resort was interesting but "does not appear to me to be an absolute priority in the short term".
Dutch Finance Minister Jan Kees de Jager questioned whether a new European institution was needed and said other options, including making use of the IMF, should be considered first.
One possibility is that EU leaders are trying to warn markets of the risk of betting on a Greek default, by talking of a rescue fund, as Greece seeks to borrow €20bn over the next few months.
European Commission President Jose Manuel Barroso said Brussels is working with eurozone states on a rescue mechanism which would stop short of something like an EMF.
"Such a mechanism would be in conformity with the current Lisbon Treaty, in particular with the 'no bailout' clause. It would include stringent conditionality," Mr Barroso told the European Parliament.
"In parallel, the commission is preparing a communication on reinforced economic policy coordination and country surveillance," he said.