Quantcast

Know Better

EU Leaders Reported Moving Closer To Greek Rescue Plan: Press

PARIS (MNI) - Despite a strong denial by Germany's government spokesman that a rescue for Greece has been decided, press reports asserting that just such a plan is taking shape proliferated Tuesday evening.

The Financial Times reported that German officials had conceded they were looking at ways to build a "firewall" in order to prevent the debt crisis in Athens from spreading across the eurozone.

According to the FT report, Germany is increasingly worried that should the financial market pressure on Greece intensify, it could begin to hit German and other eurozone banks.

The FT quoted one German government official saying that the recent steep decline in the euro and pressure on bond prices had convinced Germany to "take significant steps" to deal with the crisis. "We've had to face up to the fact that what is now a Greek problem could turn into a European one," the official was quoted as saying.

"We're thinking about what we should do if the crisis spills from Greece into other euro countries," he continued. "So it's more about finding firewalls, containing the problem, than principally about helping the Greeks."

The official added, however, that there are "no concrete plans" as yet.

Until recently, Germany has resisted the entreaties of other EU countries to extend a helping hand to Greece. But German officials have softened their stance in recent weeks as they have glimpsed the potential of the Greek situation to inflict financial carnage across the eurozone.

Germany, the eurozone's largest member, is expected to lead any Greece rescue, and any such plan certainly would have no chance without German approval.

Earlier Tuesday, the Financial Times Deutschland reported that Germany was close to unveiling a plan for Greece that might include bilateral aid as well as actions coordinated at the EU level. It said German Finance Minister Wolfgang Schaeuble is preparing to divulge the details of the plan to the leadership of his party on Wednesday.

The FTD cited German officials saying that while an EU-wide solution is being sought, aid from Germany alone was also possible.

However, shortly after the FTD report made the rounds -- along with similar reports from wire services Reuters and Bloomberg -- Germany's government spokesman Ulrich Wilhelm dismissed the reports as "unfounded" and denied any decision had been taken.

But other, similar reports continued emerging into Tuesday evening.

The Wall Street Journal reported that Germany was studying the possibility of offering loan guarantees to Greece and other eurozone countries in fiscal difficulty. France's daily Le Figaro said two options were being considered: loan guarantees for Greece administered by some sort of "European fund," and bilateral aide made conditional on Greek good faith in honoring its deficit-cutting commitments.

But it was clear from the day's events - reports of a rescue, followed by a quick denial, followed by more reports of a rescue - that any bailout plan is at best a work in progress and that considerable disagreement among EU members reigns.

The FT reported that the UK and Sweden, which are members of the EU but not the eurozone, had broken with other European countries by saying that the possibility of an IMF intervention should be left on the table.

The FT quoted both Swedish and UK officials saying the IMF has the technical knowledge to handle the Greek situation and should not be ruled out.

But many eurozone authorities, including ECB President Jean-Claude Trichet, would view the rescue of an EMU member by the IMF as a stain upon the credibility of the monetary union.

Meanwhile, the contours of a Europe-generated Greek rescue were still far from clear, and it appeared late Tuesday that financial markets were in for more roller coaster rides in the days ahead.

"Within the eurozone there are a lot of different positions, but it's very hard to predict where it will end," one official from an EMU country told the FT.