EU eyes last-resort Greek rescue scheme

(BRUSSELS) - European finance ministers were on Tuesday poring over last-resort eurozone plans to rescue Greece if necessary with billions of euros in crisis loans at dissuasively high interest rates.

European Union partners made it clear that there is little intent to press the ideas into practice, Brussels seeing the mechanism as a necessary evil that must be prepared only if the health of the euro currency is endangered.

Greece has already complained that the yield on bonds it sells in order to raise money on international markets is too high at above six percent -- but eurozone ministers intimated any EU aid would also come at a heavy price.

With ministers expected to echo their eurozone counterparts by endorsing the measures, Athens has already undertaken to curb spending and raise taxes. The onus will be on Greece to maintain a firm watch on national budget surgery.

"There are open question marks concerning implementations and decisions (before seeing if) there is a need for further steps in the years ahead," said Swedish Finance Minister Anders Borg as he arrived for the talks in Brussels.

However, the pressure on the euro is now lower than one month ago, he indicated, saying the Greek government has taken "the right decisions on taxes" and facing down turmoil on the financial markets.

If money is ever released, it will be by all 15 of Greece's partners in the euro currency area and only if ordered by leaders of the 27 EU nations.

A statement from the Eurogroup of eurozone finance ministers said the "objective would not be to provide financing at average euro area interest rates, but to safeguard financial stability in the euro area as a whole."

It would aim to "provide strong incentives to return to markets as soon as possible," meaning high rates.

"We have clarified the modalities that will allow us to take coordinated action," said Luxembourg Prime Minister Jean-Claude Juncker, who formally leads the Eurogroup countries in financial matters.

Juncker insisted that future gaps in Greek public finances could be plugged "rapidly" if required, but was at pains to repeat that the Greeks "have not asked for aid" and said the ministers "still don't think it will be necessary."

Groaning under 300 billion euros (410 billion dollars) of debt, Greece is looking to raise 54 billion euros this year just to finance the debt -- but is struggling to do so without paying premium interest rates.

European diplomatic sources have spoken of 20-25 billion euros being sought through eurozone aid.

Economic and Monetary Affairs Commissioner Olli Rehn reiterated the commission's belief that Greece was on track to cut its public deficit this year by four percentage points, from a huge 12.7 percent of national output.

Greek austerity measures have been met by a series of protests and strikes there in recent weeks.

The German government has been hawkish on the issue, and Finance Minister Wolfgang Schaeuble went as far as to warn on Monday that countries could eventually be kicked out of the eurozone if they do not respect fiscal rules.

Meanwhile, plans for European finance ministers to vote on controversial new laws curbing the hedge fund industry on Tuesday were dropped at the last minute, the EU's Spanish presidency said.

"Hedge funds are off the agenda to allow more time for us to obtain the maximum level of support possible," said spokeswoman Cristina Gallach.

"It will come back in during a later meeting of finance ministers during the Spanish presidency."

Diplomats last week said that the issue would be put to a vote, but vigorous opposition from London in the run-up to its general election appears to have killed a continental appetite to use a majority to ram through the changes.

Economic and Financial Affairs Council (ECOFIN)