European governments have agreed in principle to help heavily indebted Greece, a senior German coalition source said on Tuesday, in what would be the first rescue of a euro zone member in the currency’s 11-year history.
“The decision on help for Greece has been taken in principle within the euro zone,” a source in the German coalition government said.
Various options were under consideration and no final decision had been taken but the most likely possibility was to offer “bilateral help,” the source said.
The comments were the strongest signal so far that EU economic heavyweight Germany may be ready to step in to stave off a crisis of confidence in the 16-nation currency bloc that has roiled markets around the globe.
German government spokesman Ulrich Wilhelm called reports that a decision had already in effect been taken “unfounded,” but the newspaper Financial Times Deutschland also said Germany was preparing an aid package for Greece.
The Wall Street Journal said Germany was considering taking a lead role in a plan with its EU partners to offer Greece and other euro zone countries loan guarantees in an effort to calm market fears of a debt default.
German Finance Minister Wolfgang Schaeuble discussed the idea in recent days with European Central Bank President Jean-Claude Trichet, the Journal said in a report on its Web site, quoting a person familiar with the matter.
The reports came two days before a EU summit expected to discuss the Greek debt crisis. Outgoing EU Monetary Affairs Commissioner Joaquin Almunia fueled speculation of a rescue by urging European leaders to help Athens in exchange for drastic fiscal reforms when they meet today.
“I would like the leaders of Europe to say to the Greek authorities that in exchange for the efforts you are making, you are going to get support from us,” Almunia told the European Parliament.
“You don’t get support for free. That would simply lay the foundations for further imbalances and crisis. We have got instruments to provide that in exchange for clear commitments that they will meet their responsibilities,” Almunia said.
On Tuesday, Greek Finance Minister George Papaconstantinou outlined plans to freeze public sector wages and overhaul the tax regime to consolidate the budget.
Public sector workers planned a one-day stoppage yesterday. Portugal’s largest public administration workers union announced a one-day strike for March 4 over a planed wage freeze.
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