EUROPEAN FINANCE ministers meet tonight to advance plans for a financial rescue of Greece amid growing resistance in Germany to any bailout of the beleaguered country.
The meeting of euro-group ministers takes place against the backdrop of pressure on the single currency because of anxiety about the weak fiscal position of Greece and several other euro members.
As two senior members of chancellor Angela Merkel’s coalition expressed reservations about any rescue deal, Germany’s newly installed EU commissioner said the European authorities should be given new powers to intervene with member states if they do not take appropriate action to restore order in their public finances.
At their meeting in Brussels, the finance ministers face demands to spell out how they would intervene, following a muted response late last week to a pledge of unspecified aid “if needed” from EU leaders.
Informed sources say the ministers will discuss issuing bilateral loans to Athens and the conditions they would attach to such aid, including policy direction from Brussels.
Also under discussion is the question of whether a mechanism can be found to involve the European Central Bank (ECB) in any scheme without violating the “no bailout clause” which prohibits it from providing overdrafts to EU member states “or any other” form of credit.
Despite calls from the markets for details on how the EU might rescue Greece, sources with knowledge of the discussions say ministers may decide not to set out the parameters of any scheme for fear of inviting the government of prime minister George Papandreou to relax a stringent austerity plan.
“We have many instruments ready and will use them if necessary,” said Luxembourg prime minister Jean-Claude Juncker, who chairs the euro group.
It remains the policy of the European authorities that Greece, which has not asked for aid, should resolve its problems on its own.
However, the prospect of intervention has led to pressure on Dr Merkel. In pointed criticism, a leading member of her own administration drew a contrast between the Greek retirement age of 63 and her move to increase the German retirement age by two years to 67.
“If we start now, where do we stop?” asked Michael Fuchs, deputy parliamentary leader of Dr Merkel’s Christian Democrats. “I can’t explain to people on unemployment benefit that they won’t get a cent more but Greeks can draw a pension at 63.”
The chancellor’s coalition partners, the pro-business Free Democrats (FDP), struck a more assertive tone. “Solving this problem cannot be about aid for Greece,” the party’s budget expert Otto Fricke said. “If anything, it’s about keeping any damage away from German taxpayers.”
While a poll for Bild am Sonntag newspaper said 53 per cent of respondents said the EU should expel Greece from the euro zone if necessary, Mr Juncker told German newspaper Süddeutsche Zeitung that an expulsion would have “momentous” and “uncontrollable” consequences.
“We must prevent a state from getting close to bankruptcy,” he said. “An exit would be the end for Greece – and it would be absolutely negative for the image of the euro zone.”
In a further attempt to exert pressure on Mr Papandreou, the wider group of EU finance ministers will at a follow-on meeting tomorrow give their approval to a plan which would empower the European Commission to impose new budget measures if the current plan misfires.
Germany’s new EU commissioner Günther Oettinger said the lesson from Greece was that EU members should pay more attention to public finances and develop new budget structures.
The union might have to consider changing its fiscal rules if member states fail to becalm their public finances, he told the Welt am Sonntag newspaper. “EU states must start cutting their debt in 2011. If they refuse, the stability pact must be changed so EU authorities can better crack down,” said Mr Oettinger, who holds the energy portfolio.