GREEK PREMIER George Papandreou upped the stakes in his game of brinkmanship with German chancellor Angela Merkel by saying he may turn to the International Monetary Fund (IMF) if the upcoming EU summit does not deliver political agreement on a last-resort plan for Greece.
His comments follow remarks by Ms Merkel on Wednesday in the Bundestag backing calls for steps allowing countries to be expelled from the euro zone if necessary. The prospect of a a bail out for Greece is deeply unpopular in Germany.
“It’s an opportunity to make a decision next week at the summit,” Mr Papandreou told reporters yesterday, having declined to say on Wednesday whether he wanted a decision from the summit.
Mr Papandreou argues that agreement on a rescue mechanism would relieve pressure on the penal interest rates his administration is paying on the Greek national debt as it prepares to refinance some €20 billion in the coming weeks. “This is an opportunity we should not miss. When you have that instrument in place, that could be enough to tell the markets hands off, no speculation, let this country do what it’s doing.”
But Jean-Claude Juncker, the prime minister of Luxembourg and head of the euro group of finance ministers, suggested in strong terms yesterday that the deal was not done.
Greece needs to “do its homework” and reduce its budget deficit before expecting EU help.
“Greeks must know that there will be solidarity only if they get their shop in order,” said Mr Juncker, who chaired a meeting last Monday at which the euro group opted to provide loans to Greece if needed.
There were conflicting signals from Germany yesterday as certain sources said IMF involvement could help overcome potential legal difficulties in the country’s constitutional court.
Another German source, however, urged caution. “The chancellor hasn’t excluded any option and that’s where the buck stops. Anything else is wild interpretation.” The mixed messages from Germany are read in political circles as a stalling mechanism in the build-up to the summit.
“That would be quite a departure,” said a senior Brussels source of suggestions that IMF might provide funds for any Greek rescue.
“The equation is simple. Does Ms Merkel want the next summit to be dominated by her being under pressure over Greece?”
As the sparring continued yesterday, the premium investors charge for holding Greek debt rather than German bunds rose as high as 319 basis points.
This means Athens would have to pay about 6.3 per cent to borrow on markets, a rate Mr Papandreou says raises “ethical” questions as he makes drastic budget cuts.
In signs of further tension in the euro zone, Spain urged Ms Merkel to avoid talk of possibly expelling fellow members from the single currency, saying such comments could be misconstrued. –(additional reporting by Reuters)
