IMF working perfectly with EU on Greece: IMF chief

WARSAW (Reuters) - The International Monetary Fund is working in "perfect harmony" with the European Union over the Greek debt crisis, but Athens may not need external help to resolve its woes, the head of the IMF said on Monday.

IMF Managing Director Dominique Strauss-Kahn said that even if Greece managed to pull back from the brink, the emergency over its finances had laid bare the failure of euro zone countries to coordinate their economic policymaking.

"The problem today is that most big decisions on economic policy in the euro zone are taken by governments looking at their own interests and their own people," he told Reuters in an interview during a one-day visit to Poland.

"That cannot work in a single currency zone," he added.

After weeks of bickering, EU leaders last week agreed to create a safety net for Greece, in which the IMF was given a subordinate role to provide financial assistance if necessary.

The deal was initially greeted with silence by the IMF, prompting speculation that either it did not know what it was supposed to do or was unhappy at being expected to provide an unspecified amount of money but not set policy.

However, Strauss-Kahn dismissed such talk on Monday, saying the Washington-based body knew precisely what its role would be.

"We are always in perfect harmony with the EU," he said, with a smile on his face, declining to give further information about the plan, which is being kept highly vague: "We will move and we will say something only when Greece asks us."

HELP

Earlier, he told students at Warsaw's business school that it was "not obvious today" that Greece would need help.

His comments came on the day Greece returned to the capital markets, issuing a 7-year, 5 billion euro ($6.72 billion) benchmark bond, and having to pay more than twice what Germany pays on 7-year paper because of investor concerns.

IMF officials said their experts had recently visited Greece and they understood the gravity of the situation.

Speaking on condition of anonymity, one senior official said the fund, the world's lender of last resort, could provide money within a mere 6 days if Greece sought its help.

The involvement of the IMF, a condition imposed by German Chancellor Angela Merkel, was agreed over the objections of the European Central Bank and in the face of reluctance from other EU states including France.

Strauss-Kahn, a former French finance minister, said the Greek crisis had revealed obvious flaws in euro zone that dated back to the creation of the ambitious single currency project.

He added that these would have to be addressed rapidly, with tough mechanisms put in place to patrol budget rigor and prevent member states from failing to honor deficit pledges.

"You need to have carrots and big sticks," Strauss-Kahn said, adding: "I am afraid that up until now we have found the carrots ... but not the stick."

He suggested that one way to punish errant members was to prevent them gaining access to EU structural funds, used by many countries for things like major infrastructure programs.

He also rejected suggestions that Greece, which is struggling to cope with a debt pile worth well over 100 percent of its annual GDP, should be allowed to default, saying such a failure would hurt the finances of other members.

"If we don't solve the Greek crisis, we will all end up paying, not just the sinner," he said.

(Editing by Ron Askew)