Germany does not rule out IMF help for Greece, a solution EU is keen to avoid

Germany, EU at loggerheads over IMF role in Greece

BERLIN — Germany and the European Union were at loggerheads Friday after government officials said Berlin can’t rule out financial aid for Greece from the International Monetary Fund, a solution Brussels is keen to avoid.

EU leaders will meet next week to find a deal to help Greece, but Germany, which has the 16-nation eurozone’s biggest economy, has been reluctant to pledge any direct financial aid.

On Thursday, Greece warned it would be forced to turn to the IMF for help, which would be an embarrassment for the single currency bloc, if the EU fails to extend any concrete support package to help reduce its market borrowing rates.

A European or IMF backstop would be aimed at reassuring markets and bringing down the high rates demanded from Greece as it seeks to borrow some €54 billion this year to plug its budget gap.

“We haven’t ruled out IMF financial assistance,” Ulrich Wilhelm, a spokesman for Chancellor Angela Merkel, told reporters. “This question is open.”

However, he stressed that “decisions have not been taken and decisions are not pending.”

Greece hasn’t asked for financial support, and “we trust and believe that Greece can resolve its problems itself with its consolidation efforts,” Wilhelm said.

A Greek default would be a serious blow to the euro, but Germany in particular has resisted putting up money to bail Greece out of years of overspending.

Other European countries, however, seem more willing to extend aid, possibly in the form of bilateral loans, if needed.

“What we believe we should have now is as soon as possible some kind of mechanism prepared just in case,” EU Commission President Jose Manuel Barroso told France 24 TV.

In Brussels, the Commission was at pains to point out that Merkel committed to a “European” solution to the Greek financial crisis only last month.

It noted that she and the other 26 EU leaders agreed in a Feb. 11 statement to “take determined and coordinated action, if needed, to safeguard financial stability in the euro area as a whole.”

“This is a statement of the European leaders,” Commission spokesman Amadeu Altafaj Tardio said. “This is not a minor matter. We are an economic and monetary union, so it is quite logical we address (a possible bailout) with our mechanism.”

EU officials said privately the Commission fears that Germany’s talk of a possible IMF bailout could encourage Austria, Finland and the Netherlands, which already lean toward an IMF solution.

Merkel’s finance minister, Wolfgang Schaeuble, has argued that the eurozone should be able to resolve its own problems without calling in outside help and — with Merkel’s backing — has advocated the creation of a European Monetary Fund that could provide aid in future crises.

“From this fundamental conviction you can certainly conclude that, in the case of Greece, he would be very reticent toward financial aid from the IMF,” said Schaeuble’s spokesman, Michael Offer.

Wilhelm said the government would agree on a formal position if and when decisions are needed.

Any IMF member “can decide itself whether it seeks IMF aid or not — that is not a move that is subject to others’ involvement in the decision,” Wilhelm noted.

Greek Prime Minister George Papandreou has said he expects EU leaders to decide at the March 25-26 summit on a blueprint of aid from the 16 eurozone countries.

He says he isn’t asking for money but a clear mechanism for financial help in case Greece can’t afford to borrow from markets.

“We hope that until the summit … we will have a decision from the EU, whereupon Greece in turn will make its own decisions,” Greek government spokesman George Petalotis told private Skai TV Friday.

“Therefore, the dilemma today of IMF or EU is a dilemma that cannot be answered, in the sense that our clear priority is for Greece’s problems to be solved within the framework of the eurozone,” he added. “That is very clear.”

Papandreou has said that going to the IMF, which imposes austerity measures on governments in return for financial aid, wouldn’t hurt Greece because it has already followed IMF advice and made painful spending cuts.

Associated Press writer Robert Wielaard contributed to this report from Brussels.