EU to hold emergency summit


The International Monetary Fund has welcomed Europe's decision that Greece's debt problems require a broader response and said it would cooperate in trying to help.

"The IMF welcomes the Eurogroup reaffirming their commitment to safeguard stability in the euro area," IMF managing director Christine Lagarde said in a statement.

"We also welcome the ... recognition of the need for a broader, more forward-looking policy response to assist Greece in its efforts to restore growth and competitiveness, and to bolster debt sustainability," she added.

European Union leaders were poised to hold an emergency meeting of finance ministers after acknowledging for the first time that some form of Greek default may be needed to cut Athens' debts and stop contagion to Italy and Spain.

A senior euro zone source said the meeting will likely be held on Friday.

Ms Lagarde's statement effectively acknowledged that more must be done to prop up crisis-stricken Greece and get it to a point where it can sustain its own debts.

"The IMF will work closely with Greece and European partners to support these objectives," she said.

Euro zone ministers last night resolved to expand the powers of the Europe’s bailout fund, a move that was greeted with a "cautious" welcome from Minister for Finance Michael Noonan.

It is expected the move will set talks in train for the EU to grant longer loan maturities to aid recipients and lower interest rates.

Ministers have also opened the door for the fund to issue loans to countries for the specific purpose of buying back their sovereign bonds at market rates, thereby easing the weight of their national debt.

At the same time, the ministers dropped their explicit commitment 10 days ago to avoid a “selective default” on Greece’s sovereign debt as they work to enlist private creditor participation in a second international bailout for the country.

Speaking on RTÉ radio this morning, Mr Noonan said it was too soon to put a figure on what benefit it would have for Ireland, but there would be an improvement in the country's position.

"What we want is to be sustainable while we're in the programme and to get back into the markets at the end of the programme period. What this does is provide us with a series of opportunities to make our debt more sustainable," he said.

"It's certainly going to improve the situation, but it's too soon to measure this."

Even as ministers confront a renewed upsurge of turmoil in financial markets, the new plan marks a clear change in their response to the Greek crisis. European officials said after yesterday's meeting the bailout fund may be used to buy bonds in the secondary market or enable Greece to retire its debt at a discount.