IMF option still open, but EU would be better, Greek premier says

Mar 17, 2010, 19:59 GMT

Brussels - Greece will turn to the International Monetary Fund (IMF) if it has no other choice to keep up with its debt repayments, but it would prefer to seek any help from the European Union, the country's premier said Wednesday.

Greece faces an uphill struggle to service its debt because markets will only lend to the government at high interest rates. Many euro states do not want it to turn to the IMF for help because of the damage this would cause to the euro's image.

'If we realise that we will be borrowing at extremely high rates, there are other options and nothing is excluded, but we would certainly prefer a European solution to this issue,' George Papandreou told journalists in Brussels.

'We are still borrowing at an unreasonably high interest rate, over 6 per cent, and this creates both an economic and an ethical problem when we ask people to cut wages and they do this and this is lost to the high interest rate,' Papandreou said.

The Greek leader, elected in October, was speaking after talks with the head of the EU's executive, Jose Manuel Barroso.

Barroso stressed that the EU had 'clarified the modalities of coordinated assistance' to Greece if it should ask for help to service its debt, adding that he expected the country's stringent budget cuts render such aid unnecessary.

'Thanks to a substantial package of bold measures, Greece is on track to achieve its (budget) target ... This is a remarkable achievement in its own right,' he said.

On Monday and Tuesday, eurozone and EU finance ministers met to discuss how they might step in to save Greece from a possible costly and, for the EU, humiliating default.

But both Barroso and Papandreou went out of their way to stress that, at present, Athens has no intention of asking for help from anyone, whether it be the EU or the IMF.

'Greece has not asked for financial assistance from the eurozone members, we have asked for the political support which has been given to us ... and I thank them all,' Papandreou said.

Euro member Greece hit the international headlines after the October elections when Papandreou revealed that the previous government had massively understated its budget deficit.

The revelation shattered market confidence in the government's ability to manage its finances, hammering the value of Greek bonds and putting the euro under pressure.