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Germany rejects fund for Greece

Published:Tuesday | February 16, 2010 | 12:00 AM


Germany rejects the idea of setting up a special fund to bail out eurozone countries, like Greece, that run into fiscal trouble because budgetary problems must be solved at the root, the finance ministry said Monday.

Spokesman Michael Offer told reporters that a European equivalent to the International Monetary Fund has been floated in the German media, "does not appear to be the solution" to a problem such as that plaguing Greece because it does not get to the "root" of the problem.

Greece must reduce its budget deficit by four percentage points this year and bring it down to three per cent of gross domestic product by 2012, Offer said. That is in line with requirements for participation in the common currency.

"The problem is in Greece and, therefore, there is no way around ... the painful austerity measures," he said.

Offer stressed that the IMF, which provides loans to nations in budgetary crisis, would be limited to "technical assistance".

Financial Minister Wolfgang Schaeuble underlined in an interview with the
Frankfurter Rundschau
newspaper on Saturday that responsibility for the euro lies with the 16 eurozone countries.

"There is no textbook that explains what to do when a land within a monetary union goes bankrupt. There is no precedent for such a case," Schaeuble was quoted as saying.

"The state of California does not go to the IMF for help," Schaeuble said.

Greece's debt trouble has shaken confidence in the currency union and pushed the euro to a nine-month low against the dollar.