Storm Over Bailout of Greece, European Union's Most Ailing Economy

Youth and workers rebellion continues in Greece. The capitalist economic crisis and police repression is at the root cause of the uprising.
Originally uploaded by Pan-African News Wire File Photos

From The Times

February 10, 2010

Storm over bailout of Greece, EU's most ailing economy

Athens will be paralysed today by a 24-hour strike against a government trying to stave off bankruptcy ? as fellow members of the eurozone squabble over how best to solve Greece?s debt crisis

David Charter in Brussels

Angela Merkel tried to calm fevered speculation in financial markets yesterday that Germany was preparing to lead a bail-out of Greece amid a split in the EU on how to handle its most ailing member.

The German Chancellor denied reports that her Finance Minister was conducting secret talks with Jean-Claude Trichet, head of the European Central Bank, and with other capitals on an EU rescue fund for Athens.

Mrs Merkel has staunchly resisted suggestions that the EU must swallow its pride and turn to the Washington-based IMF for a solution to the growing economic turmoil in Greece, with fears that its troubles in international finance markets will trigger a domino effect, toppling other weak members of the eurozone such as Ireland, Portugal, Spain and Italy.

But last night there were signs of a developing European split over calling in the International Monetary Fund, a move also strongly opposed by Brussels, with suggestions from Sweden’s Finance Minister and other officials that this might be better than the EU programme outlined last week.

Mrs Merkel has repeatedly rejected the idea that the 16-nation eurozone would need to look to the IMF, which is already overseeing recovery efforts in Latvia and Hungary — both EU members outside the single currency. Her insistence that the eurozone can keep its own house in order led to market speculation yesterday that an EU bail-out was imminent.

There were also reports yesterday that Wolfgang Schäuble, the German Finance Minister, was working bilaterally and at the European level on putting together a package to help Athens.

A strong rally on Wall Street went into reverse when a spokesman for Mrs Merkel said flatly that this was “wrong”.

The crisis in Greece that is putting the euro under its biggest strain in the ten-year history of the single currency has forced its way on to the agenda of an economic summit for the 27 EU leaders in Brussels tomorrow. It is the first extraordinary meeting called by the new EU President, Herman Van Rompuy, and was supposed to be a relaxed day of long-term thinking about job creation over ten years. Instead, the prospect of a Greek default triggering a wider crisis in other weak economies such as Portugal and Spain will hang over the leaders.

The split emerged when Anders Borg, the Swedish Finance Minister, said that “the IMF has the technical knowledge” to resolve the Greek economic crisis, breaking the careful EU public consensus that the eurozone can cope. Mr Borg insisted that discussion of an IMF role in resolving Greece’s crisis should not be ruled out.

An EU official added: “There have obviously been discussions going on at an EU level about what the options are. There is a feeling that the IMF could offer a better course of action. The IMF has precedents or doing this, it has a system with measures in place.”