European ministers today stressed that a contingency plan for saving Greece from bankruptcy with emergency loans was simply prudent planning and was unlikely to be enacted.
As the euro zone tackled a government debt crisis that has exposed deep divisions, European Union partners made it clear that the European Union sees the mechanism as a necessary evil that must be prepared only if the health of the euro currency is endangered.
Hedge fund rules talks stalled
The 27 EU ministers echoed their euro zone counterparts today by backing the measures Athens has already undertaken to curb spending and raise taxes. The onus will remain firmly on Greece to maintain a tight watch on national budget surgery.
They 'endorsed the European Commission's assessment of Greece's fiscal situation, which held that Greece is on track to deliver on its promises, said EU Economic and Monetary Affairs Commissioner Olli Rehn after the talks ended.
Spanish Finance Minister Elena Salgado said of the contingency plan that 'we are absolutely not at the stage where we are imagining its use'.
Greece has complained that the yield on bonds it sells in order to raise money on international markets is too high at over 6%. But euro zone ministers intimated any EU aid would also come at a heavy price.
Groaning under €300 billion of debt, Greece is looking to raise €54 billion this year just to finance the debt but is struggling to do so without paying premium interest rates. European diplomatic sources have spoken of €20-25 billion being sought through euro zone aid.
Greek austerity measures have been met by a series of protests and strikes there in recent weeks.
A Greek government spokesman said Greece wanted its euro zone partners to provide more details on the potential aid plan during an EU summit later this month. Spokesman George Petalotis said there was now a need for greater precision on what the scheme entails, which he added could emerge during a European summit March 25 and 26.
Meanwhile credit rating agency Standard & Poor's has maintained Greece's debt rating, saying its government's austerity plan was appropriate for now. But the agency warned that a downgrade was still possible in the intermediate term.
S&P said it was affirming Greece's BBB+/A-2 sovereign credit ratings while adding that the outlook was now 'negative' in the medium term and that the rating could be downgraded in the future if reforms were not sustained.
