December 30, 2009 / 1:10 PM / 9 years ago

IMF would help Greece if asked

WARSAW (Reuters) - The International Monetary Fund (IMF) is ready to help Greece if it or the European Union asks for assistance, but the 27-nation EU should create its own mechanism to help such cases, the IMF’s head for Europe said.

A Greek flag waves in the wind as thick smoke from a forest fire rises a few miles east of Athens in this August 25, 2007 file photo. REUTERS/Yiorgos Karahalis

“The EU should create a mechanism to help out countries which found themselves in Greece’s shoes. But one has to believe Greece will solve its problems by itself,” Marek Belka told Reuters in an interview authorized for release on Wednesday.

Asked whether the IMF would be ready to help bail out Greece, Belka said: “Yes, we are ready. But it depends on whether the EU or Greece will request it.”

Soaring budget deficits and worsening debt dynamics have dealt Greece consecutive downgrades by the three major credit rating agencies this month, resulting in higher borrowing costs for the euro zone’s most indebted country in 2010.

Investors have worried that the debt problems could ultimately prevent Greece from borrowing in the bond market, potentially forcing the EU into a costly bailout and denting confidence in the euro and European assets in general.

But, delivering the third of those rating cuts last week, Moody’s Investors Service said the country remained far from a crisis and that the risks were long-term rather than near-term, driving a sharp recovery for Greek banks and bonds.

BRIGHTER EAST

Striking an upbeat tone on ex-communist emerging Europe, Belka said he was confident Romania would receive its next tranche of aid under an IMF-led 20-billion-dollar package after the government approved an austerity budget for 2010.

Romania’s parliament is due to begin talks on January 11 on the centrist coalition’s budget bill, seen as key to freeing up more aid under the IMF-led support.

“Romania is an EU country, with an independent, solid central bank. And I don’t see any problems there. I see good prospects for Romania in the coming quarters,” Belka said.

“There should be no problems with the third tranche of the IMF’s loan. In January, the IMF will send its mission to Romania and will start to negotiate the completion of the review. The only issue is the parliament’s approval of next year’s budget, but I can’t see any problems here,” he said.

On his native Poland, the only EU member state to avoid recession in the global downturn, Belka was optimistic, saying its economy could grow by 1.5-1.7 percent in 2009 and possibly faster than the 2.2 percent currently forecast by the IMF in 2010.

He downplayed concerns Poland may face big difficulties because of its rising deficit and debt and said Warsaw should finance its shortfalls at reasonable prices ahead as accelerating growth levels and the soon-to-be presented fiscal consolidation plan would limit debt growth.

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