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IMF warns of 'need for speed' in Greek bailout

Text by News Wires

Latest update : 2010-04-26

Dominique Strauss-Kahn, the International Monetary Fund's managing director, spoke out Sunday after meeting with Greek Finance Minister George Papaconstantinou, saying time was of the essence if a Greek bailout was to calm money market fears.

AFP - The head of the IMF warned on Sunday that speed was of the essence if a Greek bailout is to soothe money markets, after Germany stressed it has the right to reject Athens' call.

"The IMF, the European partners and everyone involved in the financing effort recognizes the need for speed," said International Monetary Fund managing director Dominique Strauss-Kahn in Washington after talks with Greek Finance Minister George Papaconstantinou.

"I am confident that we will conclude discussions in time to meet Greece's needs," Strauss-Kahn underlined in a his statement.

Satisfying all concerned in the timing of 45 billion euros (60 billion dollars) of loans sought by Greece from its 15 euro currency partners and the IMF may be proving more troublesome than initially thought.

After rates on commercial markets shot up well above eight percent last week on the back of worse-than-expected public deficit figures released by the European Union, Greek Prime Minister George Papandreou issued a dramatic appeal for aid on Friday.

He made it clear Athens needs an influx of serious money quickly -- with another 8.2 billion euros of debt set to mature by May 19.

However, despite IMF, European Commission and European Central Bank officials negotiating terms and conditions in Athens on loans expected at rates of around five percent, German Chancellor Angela Merkel's government has adopted an increasingly hardline stance since Papandreou formalised Greece's demand.

Merkel faces a tricky regional election on May 9, and with polls showing widespread opposition to granting bailout assistance, and political opponents threatening to block aid through the country's constitutional court, Berlin on Sunday insisted it could still say no.

"The fact that neither the European Union nor the German government has taken a decision means: it could be positive or negative," Finance Minister Wolfgang Schaeuble said.

"It depends alone on whether Greece in the coming years continues along the saving course on which it has embarked," he told the mass-selling Bild am Sonntag newspaper.

Europe's biggest economic power, Germany would be expected to contribute around 8.4 billion euros to a rescue package -- although it can also borrow the money at rates significantly lower than those at which it would loan them back out.

Any eventual aid would also require the approval of the German parliament.

The commission and the ECB are due to deliver their recommendation within "a matter of days," but Amadeu Altafaj Tardio, spokesman for the EU's economic and monetary affairs commissioner Olli Rehn, admitted that Berlin could still refuse.

"Any member state can block," the spokesman said. "It is their right if they still think that it's not yet needed and the financial stability of the euro area is not at stake."

That despite a March 25 political commitment made by all eurozone leaders through the EU to "safeguard euro area stability."

A senior EU official suggested that further delays, which he attributed to German election campaigning, could trigger fresh panic on markets that have repeatedly shown skepticism over EU promises to help.

"The election campaign can't justify anything," the official insisted. Germany's government leaders "will have to explain their position later to their citizens if the euro area as a whole is destabilised.

"This is not and has never been only about Greece," he stressed.

Athens has overall public debts approaching 300 billion euros, awaiting EU revisions, and investors fear Greece may be heading for a default.

After his talks with Strauss-Kahn, Papaconstantinou reiterated past warnings to investors that betting on a Greek default will see them "lose their shirts."

However, the tone is hardening among partners, with French finance minister Christine Lagarde also sharpening her stance on Sunday.

While Paris, set to chip in with around 6.3 billion euros, has consistently argued the need for solidarity among euro partners, she warned in another interview: "We need control mechanisms to make sure we do not fall into a bottomless pit" of lending.

Deficits and debts among other weaker economies led by Portugal have also caused sleepless nights.

Date created : 2010-04-25


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