Merkel not opposed to bilateral aid for Greece

(BERLIN) - German Chancellor Angela Merkel, in comments broadcast Sunday, indicated she would not oppose bilateral aid to help Greece out of its debt crisis, though she did not think it was yet necessary.

If Greece had trouble making payments it would be aided "in a bilateral manner by [European] states or they also have the possibility of IMF aid," Merkel said, according to a transcript of the interview released in advance.

"Finance ministers should of course discuss among themselves" measures to be taken in case of a default by a member state, she added.

"But no decision has been taken on that ... That's why I consider very explicitly that (the subject) remains open," she added.

EU leaders did not have to take a decision on the issue at their summit this week, said Merkel.

"I don't believe that Greece has need for money at the moment, and the Greek government will confirm that.

"That's why I advise against causing turbulence on the markets by raising false expectations about the European Council meeting this Thursday," Merkel said on German radio.

In recent days German officials have raised doubts about whether proposed European measures to aid Greece if it cannot refinance its debt would in fact be put into place.

They have said Berlin would not be opposed to having Athens seek a bailout from the International Monetary Fund, previously anathema to eurozone countries as it would signal they could not properly manage their monetary union.

A plan endorsed by EU finance ministers last week involved coordinated bilateral loans to Athens by willing EU members to get around an EU law banning bailout loans to any of the 16 member states that use the euro currency.

Greek Prime Minister George Papandreou on Saturday called upon EU leaders to back the plan when they meet in Brussels this week.

"We are not demanding that anyone pay for our mistakes and our debts... but we are asking for political support against speculators and the chance to borrow at rates that allow us to breathe," said the prime minister.

Papandreou also implicitly criticised Germany for blocking the EU plan, warning they risked destabilising the EU.

"Many forces forget the political importance of the euro ... In the end this could destablise the EU...," warned the Greek prime minister.

But Merkel pledged Sunday "we will do everything to preserve the stability of the eurozone."

"We will do everything for stability, that includes when necessary acting in solidatity with other countries. As such we are acting in the interest of our own futures," she said.

After taking office last year Papandreou's government revealed the country's finances were in a much worse state than had been publicly disclosed.

They said that forced it to make painful spending cuts and tax hikes to fix its public finances -- triggering strikes and violent protests on the streets of Athens.

This has raised concerns as to whether investors will buy the Greek government's bonds, and at what price, as Athens must roll over this year some 50 billion euros of its more than 300 billion euros in debt.

The yield on Greek 10-year bonds has risen to 6.333 percent, more than double the rate for German bonds, with investors preferring to lend to Athens for shorter terms.