March 8, 2010 / 5:04 PM / in 8 years

UPDATE 1-Merkel backs EMF, leaves open aid to Greece

* Merkel backs idea of EMF, says details unclear

* Does not exclude helping Greece, but not needed for now

* Says Europe must act to clamp down on credit default swaps

BERLIN, March 8 (Reuters) - German Chancellor Angela Merkel backed the idea of a European Monetary Fund on Monday and left open the possibility of helping Greece in future, while emphasising it was not in an emergency now.

Her Finance Minister Wolfgang Schaeuble threw his support behind the idea of an IMF-style rescue fund for Europe at the weekend and earlier on Monday a European Commission spokesman said the executive was ready to propose setting up a new rescue fund for the euro zone.

Merkel said while details would have to be sorted out, the European Union needed to have a mechanism to help itself if it hit difficulties, even if it meant changing the EU treaty.

“If the European Union is to be capable of taking action, it will run into such questions. The EU treaty will not be the end of history. Then we would be in a static system. I don’t want that, I want Europe to respond to new situations.”

She said the euro was based on the two anchors of the “no bailout” clause -- under which no country can take on another euro zone state’s debts -- and the Stability and Growth Pact’s fiscal deficit rules.

“The question is, what can the European Union do to help itself?” Merkel told reporters at the Foreign Press Association.

“I think the idea (of a European Monetary Fund) is a good one,” Merkel said adding issues such as who would contribute and how independent it would be still have to be looked at. “Without changing the (EU) treaty, it cannot be done. We would need a treaty change,” she said.

Merkel also said she did not rule out taking action if Greece got into an “emergency situation” although she emphasised that this was not the case at the moment.

“The immediate inability to pay is, thankfully, not the case,” said Merkel when asked about Greece’s debt crisis.

“I cannot rule out anything, but the situation is not with us at the moment,” she said, adding Greece’s bond issue last week had gone well.

“Of course the spreads are wide. That is the assessment of the market. Ireland also has high spreads. As confidence grows in Greece, the spreads will narrow again,” she said.

Merkel reiterated that the European Union had to act with regard to the use of credit default swaps to bet against countries such as Greece.

“We cannot ban CDS but we need more limits,” said Merkel.

“Making CDs more transparent can only be ruled on at a Europe-wide basis,” she said, adding that she wanted harmonisation with other countries, such as the United States, as well.

Reporting by Erik Kirschbaum and Madeline Chambers; writing by Madeline Chambers; Editing by Ruth Pitchford

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