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Pressure mounts over IMF role in Greek crisis
by Roddy Thomson | March 20, 2010

There have been widespread protests against the proposed Greek austerity measures There have been widespread protests against the proposed Greek austerity measures
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Europe split over IMF intervention for debt-ridden Greece on Friday, upping pressure on national leaders to resolve crisis plans just days from a crunch EU summit.

Germany, changing tack, said it was open to the possibility of the International Monetary Fund helping Greece while the Netherlands, Finland and Italy -- to varying degrees -- also declared themselves alive to IMF involvement.

Investors reacted negatively, with Greek government bond yields -- the interest rate that Athens must pay in order to raise money on financial markets -- also rising sharply. The euro weakened against the dollar.

Non-euro peers Britain and Sweden firmly back an approach to the International Monetary Fund if Athens concludes that it cannot keep up with debt repayments.

The shift is not universal. There has been no change in the French position, which holds that the Greek troubles are an internal eurozone matter.

Ireland is also opposed to going cap in hand to Washington, according to a government source.

The EU's budgetary overlord, Olli Rehn, said leaders had to come to a "specific political conclusion" and clarify the way forward "next week," having compared notes with IMF chief Dominique Strauss-Kahn.

But in a pointed sign, a diplomatic source warned it was unlikely that EU president Herman Van Rompuy would find sufficient support to place the issue on the formal agenda for the March 25 and 26 EU summit.

Greek Prime Minister George Papandreou has urged the EU to help his country borrow more cheaply when they gather in Brussels next Thursday and Friday.

"The German government does not rule out aid from the IMF if Greece requests it," spokesman Ulrich Wilhelm said after reports that Berlin was concerned European aid for Greece could break German and EU law.

"Time is running out" for definitive action, said Ulrich Leuchtmann, an analyst at Germany's Commerzbank, as Greece needs to raise some 20 billion euros (27 billion dollars) from international debt markets over the next two months.

In afternoon London trade, the European single currency tumbled to 1.3531 dollars from 1.3603 late in New York on Thursday.

The yield on Greek 10-year bonds rose to 6.333 percent from 6.265 percent on Thursday, more than double the rate for German bonds.

The European Central Bank has already said that an approach by Greece to the IMF would be "inappropriate."

Outgoing Dutch finance minister Jan Kees de Jager said his administration backed the IMF route, but added that the IMF alone "will not be enough" and that there would have to be a "parallel" European solution.

Finland, meanwhile, believes that eurozone contributions should be "bilateral" and "voluntary."

A British diplomat stressed on Friday that "in the first instance this is a eurozone issue," but said IMF assistance -- "technical or financial" -- can be beneficial.

The IMF has never rescued a eurozone member but has been active in other EU states in recent months, giving out loans to Hungary, Latvia and Romania.

An IMF rescue for Greece would be seen by some as a humiliation for the eurozone.

"It's not a question of prestige, it's a question of seeing what is the best way to respond to the situation," European Commission chief Jose Manuel Barroso said in an interview with France 24 television.

Under pressure from the EU, Athens has announced draconian action to fix its public finances -- triggering strikes and violent protests on the streets of Athens.

AFP