EU backs Greece not to need last-resort rescue

(BRUSSELS) - Europe insisted Tuesday that a contingency plan to save Greece from bankruptcy with emergency loans was only prudent foresight and unlikely to be enacted, as Athens pushed for concrete details.

As the eurozone tackled a government debt crisis that has exposed deep divisions, European Union partners made it clear that the 27-nation bloc sees any eventual aid as a necessary evil that must be prepared only if the health of the euro currency is endangered.

EU ministers echoed their eurozone counterparts on Tuesday by backing the measures Athens has already undertaken to curb spending and raise taxes.

Spanish Finance Minister Elena Salgado, chairing the talks, said of the contingency plan that "we are absolutely not at the stage where we are imagining (its) use."

German Deputy Finance Minister Joerg Asmussen said the eurozone "does not anticipate a decision at the EU summit" next week either.

Greece's finance minister nevertheless welcomed the "serious headway" made in drawing up the plan, which reflects a step-change in moves to give the EU a greater say in pan-national economic governance.

He also said he expected the bond yields Athens has to offer would now fall.

"It is clear we are not happy paying the kind of markups and spreads we are paying at the moment," said George Papaconstantinou, referring to a rate of 6.3 percent on the last bond issuance earlier this month.

That rate is about twice what low-risk 10-year German government bonds yield.

The minister said Greece had a deficit at the end of February of one billion euros (1.375 billion dollars) compared to four billion euros at the same point last year.

Greek Prime Minister George Papandreou appealed Tuesday for European "solidarity" to combat financial market speculation, which he has said has contributed to the country's financial turmoil.

"We need Europe's solidarity to win against financial speculation," Papandreou said after meeting Hungarian counterpart Gordon Bajnai in Budapest.

Speaking in Athens, where the austerity drive has triggered strikes and violent protests, Greek government spokesman George Petalotis underlined that greater precision was required.

"We are waiting to see how the European Union action will evolve... We hope that other EU countries will do their duty and implement the principle of solidarity."

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

Luxembourg Prime Minister Jean-Claude Juncker, who leads eurozone finance ministers when they meet, said he had an "almost unshakeable conviction" that Greece would not need emergency aid after it launched austerity measures to cut its public deficit and debt.

But if financial markets were to continue to "speculate against Greece in an unreasonable manner" despite its efforts then "we would be ready" to provide bilateral loans to Athens, he told Germany's ZSF television

The euro rallied against the dollar on Tuesday after Greece avoided a new downgrade of its sovereign debt, which has shaken the European single currency.

The euro rose to 1.3745 dollars in late deals in London from 1.3671 late in New York on Monday.

Standard & Poor's, a international credit rating agency, said it was maintaining Greece's credit ratings as it lifted a threat in the short-term to lower the note.

The agency said the government's austerity budget was "appropriate" to achieve its 2010 fiscal target.

"We view the government's fiscal consolidation programme as supportive of the ratings at their current level, hence our rating affirmation," Standard & Poor's credit analyst Marko Mrsnik said in a statement.

Groaning under 300 billion euros of debt, Greece is looking to raise 54 billion euros this year just to finance the debt.

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

Main results of the Economic and Financial Affairs Council 16 March 2010