Increasing pressure on the European Union, Greece may seek financial help from the International Monetary Fund over the April 2-4 Easter weekend if no detailed rescue plans are forthcoming from the EU, a senior Greek official said Thursday.
Disappointed that another round of meetings by senior EU and euro-group officials this week failed to produce concrete steps to help Athens in its scramble for funds, the Greek government is now looking with scant optimism toward an EU summit next week, the official said.
“We still want a solution within the European Union, but it doesn’t look good,” the official said. “If there is no clear support at the EU summit on March 25, we will have to decide where to go next,” he said. “There are a number of scenarios on the table, but the most prominent one is the IMF.”
The German financial ministry this week warned Greece not to expect detailed financial aid package from next week’s meeting of EU heads of government.
Prime Minister George Papandreou is “in steady contact with” IMF Managing Director Dominique Strauss-Kahn, the official added. The IMF, which has been giving Greece technical assistance on the debt crisis, has said it stands ready to help.
Mr. Papandreou said Thursday he has talked to the IMF as high interest rates are wiping out the steps Greece is taking to reduce its debt levels. The steps Greece is taking are those that would have been mandated by the IMF, he told the European Parliament. “They would ask nothing more,” he said. “We have the worst of the IMF” without the benefits of an IMF loan, he said.
Mr. Papandreou said he still would prefer a European solution, but the senior official said hopes were fading, especially as a rift with Germany over the crisis was deepening. Greece’s minister of economy, competitiveness and shipping, Louka Katseli, told local media Wednesday the chance of going to the IMF was 70%.
Greece’s debt crisis—the government last year admitted to a budget deficit of 12.7% of gross domestic product, triple the EU limit—has spooked global markets in recent months, battering the euro on worries that Athens might default and that contagion could spread to other indebted euro-zone economies like Spain and Italy.
The EU has made general pledges of support for Greece, but Germany, the EU’s biggest economy, is notably reluctant to give any aid. Athens argues that it needs help such as loans, guarantees or bond purchases to lower what is says are crippling borrowing costs.
Despite Greece’s series of painful budget-cutting tax increases and spending cuts that have caused mass protests, investors demand a yield of some 3 percentage points higher for Greek 10-year bonds than for German bunds. Greece, which has sold €18 billion ($24.73 billion) worth of bonds out of this year’s total borrowing needs of €54 billion, must redeem some €22 billion of bonds in April and May.
It isn’t clear how much the Greek threats to go to the IMF are meant to put pressure on the EU to come up with aid, but Germany at least appears unruffled at the prospect of an IMF rescue for a euro-zone member. A person in the Berlin government said Tuesday that “Germany would be open to an intervention” by the IMF if euro-zone countries deemed it “a one-time necessity.”
Germany’s position toward Greece appears to be hardening.
Chancellor Angela Merkel told Parliament Wednesday she wants a mechanism that could in the future exclude euro-zone countries that repeatedly fail to abide by its standards. While such an idea is seen as having almost no chance and Mr. Papandreou said there was “zero possibility” of Greece leaving the euro zone, Ms. Merkel’s comments further soured the bilateral mood.
“The rift with Germany is widening instead of narrowing,” the senior official said. “There is an increasing belief in the government that the IMF will be the only solution.”
As for the timing of a potential IMF aid request, the official said no decision would be made until after next week’s EU summit but that the long Easter weekend—the Western and Greek Orthodox holidays coincide this year—would allow “time for the news to be absorbed” while markets were closed.
Greece had been planning to raise €10 billion through one or two bond sales this month, but the senior official said such plans are now likely on hold until after the EU summit.
“One thing is for sure,” he said. “We will not go to the market again with these barbaric interest rates because this is a recipe for bankruptcy.”
— Patrick McGroartyin Berlin and Carolyn Henson in Brussels contributed to this article.
Write to Costas Paris at firstname.lastname@example.org