EU rescue plan ‘would end fears of Greek debt’
Greece's finance minister said a detailed rescue plan from other eurozone nations would be the best way to soothe market fears that Greece could default on debt payments.
Eurozone nations pledged last week to aid the debt-ridden Greece “if needed to guard financial stability in the euro area” — but did not say how they would help the country. Greece's debt problem has undermined the shared currency.
At a meeting of EU leaders, Finance Minister George Papaconstantinou said: “My guess is that what will stop markets attacking Greece at the moment is a further more explicit message that makes operational what has been decided last Thursday.”
Market worries of a default have hiked the cost of Greek government borrowing and caused the euro to slide to a near nine-month low against the US dollar.
Mr Papaconstantinou said the 16 countries that use the euro need to go beyond that to “work out a mechanism so that if necessary the mechanism will be there” for any member that cannot pay its debts.
“I think this is the logical way of addressing the issue,” he told an audience of EU policy makers at a European Policy Centre think-tank event in Brussels.
But Mr Papaconstantinou said last week's statement was a “watershed” because it showed that “in the eurozone, no one country is alone and when it comes down to it they stick together.”
He blamed financial markets for exaggerating Greece's debt worries, saying Greece's economic output is just over 2% of the euro area's and a default “would not ... create a problem for the euro area”.
“Any country is prey and will be prey to speculative forces,” he said. “Today it's Greece, tomorrow it could be another country.”
Germany rejected the setting up a special fund to bail out eurozone countries, like Greece, that run into budget trouble.
Finance Ministry spokesman Michael Offer said that a European Monetary Fund would not help a case such as Greece's.
He said there was “no way around” painful austerity measures being pushed through by the Greek government.
Mr Offer said Greece must reduce its budget deficit by four percentage points this year and bring it down to 3% of gross domestic product by 2012. That is in line with requirements for participation in the common currency.
Greece's debt trouble has shaken confidence in the 16-country currency union.