In an interview with FRANCE 24, European Commission President, José Manuel Barroso, spoke about the possibility of IMF assistance for Greece – and roundly rejected the idea mooted by Angela Merkel of kicking out a member of the eurozone.
Weighed on by Greece’s debt woes, the euro continued its downward trajectory Friday, as European Commission President Jose Manuel Barroso told FRANCE 24 that there was not a “question of prestige” involved in eurozone members seeking financial support from the IMF.
“Greece and all the member states of the EU are members of the IMF. In fact, the EU member states are by far the biggest source of revenue for the IMF… it's not a question of prestige, it's a question of seeing what is the best way to respond to the situation,” Barroso told FRANCE 24.
Seeking IMF help would be an unprecedented step by a eurozone country, and some market commentators point out that it would be a humiliating step to take for the euro currency block.
Over the past few days, there have been numerous disagreements between member countries on how to tackle the grouping’s general long-term economic policies.
While Germany has officially declared that Greece receiving IMF aid is an acceptable option, France has previously opposed the idea. This opposition in Paris appeared to be softening Friday, however, with French government officials declaring that Paris was not hostile to IMF assistance.
A call for swift EU action
Speaking to FRANCE 24, Barroso said eurozone countries, including Germany, would be ready to extend aid to Greece - if asked. "Germany is ready in case Greece needs it, and so far Greece has not asked for financial support," he said.
In a short statement to reporters Friday evening, Barroso called for swift action within the EU, calling on member states to agree on a standby aid package for Greece “as soon as possible”.
He also urged members of the 16-nation eurozone block to offer bilateral loans to Greece, adding that such a measure would not violate eurozone rules against bailouts.
Excluding a eurozone member is ‘absurd’
The Greek debt crisis has strained relations between EU member states, most notably between France and Germany.
In a statement that sparked howls of protest from many eurozone members earlier this week, German Chancellor Angela Merkel called for eurozone countries that do not meet the criteria of stability to be excluded from the 16-member grouping. Merkel is very reluctant to pay out significant sums for other eurozone countries economic problems as it would play very badly domestically in Germany.
But in his interview with FRANCE 24, Barroso dismissed the idea of kicking out eurozone members. "I do not comment on other’s comments,” he stressed. “What I can tell you is the position of the Commission…currently, excluding a member state from the eurozone is not possible. It's absurd.”
He also said the euro area was "ready to take all the necessary measures" to guarantee Greece's financial stability.
Seeking mechanisms for the future
Greece has a budget deficit that is four times bigger than that permitted by current eurozone agreements. Greek Prime Minister George Papandreou has pledged to implement spending cuts and increase taxation to cut the deficit.
“Common policy implies that if you belong to the monetary union, you have to be responsible at some point,” said Carlos Vegh, professor of economics at the University of Maryland and expert in international finance. “If you are part of the euro, you cannot devalue your way out of trouble. The idea that you can run up a huge fiscal deficit and that the markets are not going to punish you for it… it’s [Greece’s] fault, not the speculator’s fault,” he said.
EU heads of state and government are expected to discuss the issue at a summit in Brussels next week. Days ahead of the meeting, EU Economic and Monetary Affairs Commissioner Olli Rehn has maintained that EU members need to arrive at a “specific framework for coordinated action”.
“We should reinforce the surveillance in the eurozone and that’s exactly what we’re going to propose next month: some new mechanisms in respect of the current treaty,” said Barroso.
Whatever decision is made over the next few weeks and months by the economic block, the world will be watching to see if the eurozone can cope coherently with its first major challenge since its inception.
Date created : 2010-03-19