EU ups pressure on Merkel to aid Greece

(BRUSSELS) - EU leaders upped pressure Monday on German Chancellor Angela Merkel, seeking to nail down aid for Greece at a summit this week and warning that her resistance may feed market attacks on the euro.

European Commission chief Jose Manuel Barroso led the assault as a new poll showed the stakes rising in the Greek debt crisis with 61 percent of Germans opposed to a bailout, and 40 percent even wanting Berlin to quit the eurozone.

Barroso was backed by the bloc's current Spanish chair, which said Thursday and Friday's summit was a defining moment for Europe, with full-time EU president Herman Van Rompuy's office working flat out in search of compromise.

France said "new ideas" were required, with a yawning gap between the willingness of some of Greece's 15 eurozone partners to cough up state-backed loans and calls echoed by Italy to ensure full solidarity.

"We cannot prolong any further the current situation," Barroso told German daily Handelsblatt. "We need a decision at this summit so that we know how we are going to manage the Greek crisis."

Warning of "deep uncertainty," he underlined: "We can't keep going this way, we risk endangering the stability of the eurozone and feeding speculation (on markets)."

The Greek crisis put new pressure on the euro as the currency fell to a three-week low point at 1.3496 dollars, while the interest rate demanded by investors to hold Greek debt rose sharply to more than 6.5 percent.

Spanish Foreign Minister Miguel Angel Moratinos said billions of euros of budget cuts already implemented by the Greek government showed its commitment should be returned with "trust" and "solidarity."

Greek Prime Minister George Papandreou has warned that his government might be forced to turn to the International Monetary Fund, an abhorrent idea for many eurozone states -- although one Berlin now says it can live with.

In a pointed put-down, Merkel said on Sunday that "raising false expectations" of any deal at the summit -- even without pressing the button on hard cash loans -- would itself cause "turbulence" on markets.

Widespread unease among German taxpayers could be seen in the Financial Times poll showing a hardening of opposition ahead of a key regional election on May 9.

Buried under debts of 300 billion euros, Greece is attempting to slash a runaway public deficit that is close to 13 percent of national output -- more than four times the limit allowed by the eurozone.

Loans totalling 22 billion euros are being sought from eurozone partners, at lower rates than those currently available to Athens on the bond market, closer to those the IMF would offer, and with IMF top-ups, a European source said.

"We have to support Greece," said French Foreign Minister Bernard Kouchner, stressing that EU partners must find a way to "talk" before the summit starts.

Italian counterpart Franco Frattini said there was a "moral duty to intervene as soon as possible," although he also cautioned against taking the summit "hostage" with the issue.

Athens has officially only asked for help to fend off financial speculators, as it seeks to refinance more than 50 billion euros (68 billion dollars) of debt this year, including more than 20 billion by the end of May.

Athens is currently paying roughly twice the interest that Germany does to borrow money.

Merkel also faces a possible constitutional court challenge to any state aid for a fellow EU state owing to a 'no bailout' clause written into eurozone rules.

And German news magazine Spiegel says a domestic "power struggle" is underway, pitting Merkel against Finance Minister Wolfgang Schaeuble, which is "weakening Merkel's position in Brussels."

It said Merkel was acting with a "resolve reminiscent of (Margaret) Thatcher," the former British prime minister who secured a multi-billion-pound rebate for London in lieu of bumper EU aid to French farmers.

"Merkel is making a cool calculation -- the role of the Iron Lady won't make her more popular in Brussels, but back home it will do," Spiegel added.

"That's why she's all the more annoyed that her most important minister is only half-heartedly supporting her."

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