Greece says it may turn to IMF

Financially troubled, it tries to put pressure on euro-zone countries

By: JournalNow Staff | THE ASSOCIATED PRESS
Published: March 05, 2010

BERLIN --

Who's afraid of the IMF? Greece is betting that the major European Union powers just might be.

The heavily indebted Balkan country, facing German and French reluctance to pony up and help bail it out as a fellow euro user, has declared that it may turn to the International Monetary Fund, an international lending agency based in Washington.

But an unprecedented IMF bailout of a euro-zone member country would signal that the European currency union can't handle its own troubles -- and some are now calling for the creation of a European monetary fund instead.

Greek Prime Minister George Papandreou, who will travel to Berlin today to meet with Chancellor Angela Merkel before heading to Paris to meet President Nicolas Sarkozy on Sunday, has warned that if the new austerity measures it adopted this week fail to impress his counterparts in the euro zone, Greece will turn to the IMF for help.

"From today the problem can't be considered ‘Greek'. We are doing what we must and more," Papandreou said. "So now, it is the time of Europe."

If the EU and the markets don't respond "as we would wish, because of speculative behavior, our last resort would be the International Monetary Fund."

Greece is already receiving technical help and advice from the IMF, but has not appealed for a bailout.

The idea that Greece is considering appealing for help from the IMF is akin to drawing a line in the sand. It would also put the euro zone, and Germany as its largest economy, in the awkward position of defending the integrity of the 16-nation euro from criticism that it cannot stand up to tough tests on its own.

Alexandros Tokhi, a political scientist and European Union expert at the Berlin Free University said that if Greece were to go through with asking the IMF for help that would seriously weaken the Euro monetary system's credibility.

"One of the euro states would actually address another financial institution outside the EU for assistance," Tokhi said.

However, he thinks Greece's main goal is to pressure the euro states to help Greece with promises of help that would improve Greece's chances of raising money. "Playing the ‘IMF card' increases the pressure on the EU and on its member states," Tokhi said.

The IMF reiterated that it was ready to help Greece with technical expertise, but did not say if Greece had made any other requests.