Berlin looks to build Greek ‘firewall’
By Tony Barber in Brussels
Published: February 9 2010 18:37 | Last updated: February 9 2010 20:33
Financial markets surged on Tuesday on hopes of a European rescue plan for Greece, as officials in Berlin admitted it was looking at how to construct a “firewall” to prevent the debt crisis spiralling out of control.
A German government official said that the steep decline in the euro and pressure on bond prices had forced Berlin to ”take a significant step” in how to deal with the crisis.
Germany is worried that any flight out of Greek assets, especially government bonds, could hit its banks and those in other eurozone countries.
As the eurozone’s dominant economy, Germany would be expected to take the lead in marshalling financial support for a Greek bail-out. There are fears the crisis could spread to other eurozone states with big deficits such as Spain and Portugal.
”We’ve had to face up to the fact that what is now a Greek problem could turn into a European one,” the official said.
”We’re thinking about what we should do if the crisis spills from Greece into other euro countries. So it’s more about finding firewalls, containing the problem, than principally about helping the Greeks.” He added there were ”no concrete plans” as yet.
Michael Meister, a senior German parliamentarian, was quoted as saying that help was possible under certain circumstances and that Wolfgang Schäuble, finance minister, would brief lawmakers on Wednesday about options for helping Greece either bilaterally or at EU level.
Angela Merkel’s spokesman denied any decision had been taken. Wall Street rose strongly, with the S&P 500 index of leading stocks gaining 1.4 per cent. The euro leapt more than a cent against the dollar on hopes of a bailout before slipping.
On the eve of a summit that will be dominated by talks on how to shore up confidence in the eurozone, differences emerged over how to deal with the crisis.
Countries outside the euro area, led by the UK and Sweden, broke from the public position of Germany, France and other eurozone members by suggesting that, if Greece required help, the International Monetary Fund was best placed to supply it.
A Swedish official said: “The IMF has the technical knowledge”. Officials in London have privately urged eurozone countries not to rule out an IMF intervention, even if European pride is dented.
“The fund has the expertise and the resources,” said one UK official. “We are supporting the eurozone in whatever they do, but we felt the IMF route should not have been excluded at an early stage.
There were signs, too, that eurozone members had yet to arrive at a common position in advance of Thursday’s summit, where EU heads of government will be joined by Jean-Claude Trichet, the European Central Bank president.
“Within the eurozone there are a lot of different positions, but it’s very hard to predict where it will end,” said one official in a eurozone country.
Financial Times
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