Greece warns it might revive IMF rescue option

(ATHENS) - Greece warned on Wednesday it might have to seek help from the International Monetary Fund if the European Union does not do more to help it out of a debt crisis.

Government spokesman George Petalotis told an Athens radio station that because a meeting of EU finance ministers on Tuesday "did not yield a clearer positive development the way we wanted it," Greece could still raise the IMF option at an EU summit on March 25.

Ministers gathered in Brussels endorsed plans by Greece to curb spending and raise taxes as it battles with a huge public debt and deficit.

They also approved the use of emergency loans to Greece but only as a contingency against the possibility that the country might default.

Ministers described the approach as prudent foresight, a necessary evil to be activated only if the health of the euro currency were endangered by a Greek default.

The EU argues that in taking a firm line so far, it has ensured that Greece announces tough corrective measures which, if applied, will be enough to win credibility and bring down the interest rate which Athens has to pay for loans.

Greek authorities had been looking for an unambiguous expression of EU support to enable the government to borrow funds on financial markets at rates comparable to its European partners.

In two bond issues totalling 13 billion euros earlier this year -- from a total borrowing plan of 54 billion euros (74 billion dollars) -- Greece was forced to offer interest rates of significantly above 6.0 percent to attract investors.

That rate is about twice what low-risk 10-year German government bonds yield, prompting Petalotis earlier this week to denounced it as "barbaric", but it has fallen slightly since Greece announced a new round of draconian budget cuts.

It has fallen slightly again since the EU decision on contingency help on Tuesday, which was matched with an announcement by a key credit rating agency which gave Greece a breathing space on the standing of its debt.

"Nobody wants to go to the IMF...(but) it will be a forced option if there is no other proposal until then," Petalotis said on Wednesday, referring to the EU contingency plan and to an EU summit on March 25.

"We need to borrow from somewhere, but not at the interest rates at which we have borrowed so far," he insisted.

"If we truly come to believe that the EU cannot affect (loan rates) then we should re-evaluate the EU's role in current world affairs," he said.

Athens has pledged to implement deep spending cuts and tax increases worth about 16 billion euros this year as it labours to slash a budget deficit of 12.7 percent of output and a debt of nearly 300 billion euros (411 billion dollars).

Earlier this month, Greek authorities warned that if help from the EU and its fellow members of the eurozone were not forthcoming they would reluctantly go to the IMF.

The EU and the European Central Bank have made clear that such an approach to a body outside EU institutions would be unwelcome, and one financial analyst has described these two contrasting positions as "brinkmanship".

Greek Prime Minister George Papandreou, speaking in Budapest on Tuesday after a meeting with Hungarian counterpart Gordon Bajnai, repeated his request for EU "solidarity" to help defeat "possible speculative appetite by markets."

He told a news conference: "Depending on the (EU summit) decision, Greece has to take its own decisions on the steps it will follow."

"George waves IMF banner," leftist Eleftherotypia daily meanwhile commented on Wednesday.

"Europe steps out, IMF coming in," said pro-government Ta Nea daily, noting that the upcoming EU summit on March 25 -- a Greek national holiday commemorating the country's revolution against the Ottoman Turks -- would be "crucial" for the Socialist government's decisions.

European diplomatic sources have said Greece seeks 20-25 billion euros through eurozone aid.