THE PRESIDENT of the European Council, Herman Van Rompuy, has said he envisaged some form of voluntary private sector involvement in a new Greek bailout, but the two “red lines” of credit default or the triggering of a credit event must be avoided.

Speaking to the Irish Institute for European Affairs in Dublin Castle yesterday, Mr Van Rompuy, said while the Greek situation was “worrisome”, he was confident a final agreement on a package would be reached.

The four elements of the deal will include a correction of the “fiscal slippage” in Greece’s budgetary efforts this year; a new three-year reform programme, including “ambitious privitisations”; additional European Union and International Monetary Fund financial support for Greece; and some form of private sector involvement in the package.

Mr Van Rompuy said that “time is of the essence” for Ireland in solving its financial problems. Outlining how, as budget minister in Belgium, he had helped bring about a reduction in the public debt from more than 130 per cent of gross domestic product in 1995 to 114 per cent in 1999, he said “it can be done”. “We could not devalue our currency due to our strong links with the German mark, so with resolve and time, strong adjustments are possible.”

He said he had discussed a reduction in Ireland’s interest rate on the IMF-EU package with French president Nicolas Sarkozy last Wednesday and with Taoiseach Enda Kenny, yesterday.

“I think we are discussing solutions and I think there really must be ways of getting out of this issue. I can’t say more on this.” He said he was more optimistic of achieving a solution after the talks. He said the fact that a crisis in three countries which represent about 6 per cent of euro area GDP could threaten the financial stability of the entire euro zone had been “totally underestimated”.