IMF to play role in support for Greece

After days of mounting speculation, the leaders of the eurozone’s two largest economic powers, Germany and France, agreed on a rescue package for debt-ridden Greece comprising bilateral loans from EU member states and the support of the International Monetary Fund. The agreement, forged by French President Nicolas Sarkozy and German Chancellor Angela Merkel, was reportedly reached just an hour before the official launch of a summit of EU heads of state in Brussels. The one-and-a-half-page document, seen by Kathimerini’s Brussels correspondent, foresees «a European framework consisting of coordinated bilateral loans which member states would be invited to contribute,» and which would be complemented by «International Monetary Fund loans.» According to Sarkozy’s office, the agreement comprises «very precise conditions» under which eurozone countries «could intervene» to help another euro-area member. According to officials of the German government, which had been very reluctant to back a rescue plan for Greece, yesterday’s Franco-German deal would result in a «substantial» injection of IMF funding into Greece’s reeling economy, if approved by other EU member states. The details of the agreement, and its assessment by other EU leaders, was expected late yesterday. Reacting to the Franco-German scenario, the head of the European Central Bank, Jean-Claude Trichet, was very downbeat, describing a possible IMF bailout as a «very, very bad» thing. «Any sign of a lack of responsibility on behalf of the members of the eurozone is bad in my eyes,» Trichet said in an interview to a French television network. «If the International Monetary Fund or any other body takes action instead of the Eurogroup, instead of the governments… this is obviously very, very bad,» Trichet added. «We want the eurozone member states to exercise the treaty fully, totally and faithfully in its spirit and to the letter,» he said. Earlier yesterday Merkel had stressed that Germany is committed to protecting the stability of the eurozone and its currency. But she said that Greece should only be helped when at the brink of bankruptcy. «The German government will push its view that any emergency support should come from a combination of the IMF and joint bilateral help from the eurozone. But again I say, this can only be a last resort,» the German chancellor said. Meanwhile top-ranking EU officials emphasized the need for a swift solution to the Greek dilemma. European Commission President Jose Manuel Barroso said it would be «unthinkable» for EU leaders to conclude the summit today without a consensus. «It is an urgent problem to which we have to find a solution,» he said. Government ‘fully’ satisfied with agreement The PASOK government yesterday declared itself completely satisfied with the support structure put together to prevent Greece’s economy from collapsing as one of its top officials said Athens had expected the International Monetary Fund would have some part to play in the scheme. «It is positive that there is a plan that we believe meets our requirements fully,» said government spokesman Giorgos Petalotis. «The agreement foresees the creation of a mechanism that will basically be European but in which the IMF will also participate.» Athens had been hoping that it would not have to call on the Washington-based fund for financial assistance. But it was agreed in Brussels yesterday that the money Greece might need if it has difficulty in bringing down the interest rates at which it borrows would not be provided by eurozone members alone. «We asked for the creation of a support mechanism and it was to be expected that the IMF would play a part,» said Petalotis, who hopes that the announcement of the agreement will help drive down the spread on Greek bonds. «We believe that the creation of a mechanism sends a message of stability that will also have an impact on the Greek economy,» he said. Petalotis added that Greece had made its positions clear in recent days and that the final wording of the document, which was written by the French and German governments, was agreed during a meeting between Prime Minister George Papandreou, German Chancellor Angela Merkel, French President Nicolas Sarkozy, European Central Bank President Jean-Claude Trichet and the president of the European Council, Herman Van Rompuy. Ahead of the meeting, Papandreou stressed that Greece would emerge from the current crisis irrespective of the decision reached by his EU counterparts on aid. «We will make it on our own,» he said ahead of the afternoon talks. The Greek premier added that any solution should be for the broader good of Europe, not for Greece alone. «Today the challenge is a European one, ensuring that we bolster the eurozone and stabilize the euro currency,» he said, adding that he believed EU leaders would «rise to this challenge.»

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