Barroso backs EU package to bail out Greece
By Tony Barber in Brussels, Quentin Peel in Berlin and agencies
Published: March 19 2010 15:16 | Last updated: March 20 2010 13:20
José Manuel Barroso, the European Commission president, urged European Union governments on Friday to reach an explicit agreement next week on a financial standby facility for Greece to help it overcome its debt crisis.
Mr Barroso said the rescue plan should involve direct loans to Greece from eurozone governments, but declined to be drawn on whether the International Monetary Fund should also provide funds. "We cannot prolong any further the current situation," he said in a statement in Brussels..
His intervention intensified the debate across Europe over how far to involve the IMF in a Greek rescue. Some sort of compromise involving both an IMF programme and eurozone funding is looking increasingly likely, but hostility to the Fund remains.
In spite of indications this week that Angela Merkel, the German chancellor, would back IMF involvement, Wolfgang Schäuble, finance minister, made clear on Friday he still had "strong reservations". Reports from Paris also underlined doubts held by Nicolas Sarkozy, French president.
Ms Merkel said on Saturday that Greece must implement its austerity programme and praised Greece Prime Minister George Papandreou for his efforts.
“I thank the Greek Prime Minister for his austerity programme,” Ms Merkel said. “It’s an impressive performance. But it has to be done.”
The EU's 27 heads of government are due to meet in Brussels next Thursday and Friday for a summit at which George Papandreou, Greece's prime minister, has said he will press for a clear-cut statement on how the EU would help his country if it were to request financial assistance.
Mr Papandreou defended the steps Greece has taken to tackle its fiscal crisis and will not default on its debt obligations on Saturday in a speech to his socialist party’s national council.
“Let everyone be certain, Greece will not default, we will not let it default. Greece has a strong government and courageous people. We are returning to the road of economic stability,” he said.
Mr Papandreou has called for action to curb speculation that he claims has driven yield spreads on Greek government bonds over core European benchmarks at record highs, adding to fiscal strains.
“We are building alliances in and outside the EU. We are convincing our partners for changes to set limits to speculators. We are not asking anyone to pay our debts. We will do this by ourselves,” he said. “We want to be able to implement all that we have announced and enacted calmly.”
Greek bond markets and the euro weakened on Friday because of continuing uncertainty over a likely assistance package. Greek bond yields, which have an inverse relationship with prices, closed above 5 per cent - the highest close in two weeks - while the euro fell to $1.35.
Greece contends an EU statement would calm markets and cut the interest rates charged on its debt, enabling it to implement an economic austerity programme and avoid appealing for emergency funds.
"It is essential that, when we deal with a euro area country, there is a European lead and a European response," Olli Rehn, the EU monetary affairs commissioner, told a conference in Brussels.
He later said: "It is important that the EU, in the course of next week, comes to a more specific political conclusion about the European framework for co-ordinated and conditional action, if it is needed."
Mr Barroso echoed Mr Rehn's remarks in an interview with the France 24 network to be broadcast today. He also hinted at a wider role for the IMF in the crisis than as provider of purely technical advice.
Noting that European countries were prominent contributors to the IMF's resources, Mr Barroso said: "It's not a question of prestige. It's a question of what is the best way to respond."
Eurozone finance ministers said last Monday they had "clarified" how a rescue operation for Greece would work.
Additional reporting by David Oakley in London
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