Greece’s debt crisis shook world markets again on Wednesday amid speculation that Athens will resort to the International Monetary Fund to resolve its financial woes if EU leaders fail to spell out the terms of a rescue package.
Greek recourse to the Washington-based fund would be a huge blow to eurozone pride. The currency took a pounding on Wednesday and global stock markets fell sharply amid mounting concerns — reinforced by tough words from German chancellor Angela Merkel — that the EU might
not consent to giving the indebted country concrete financial support.
Greece upped the ante, saying it would have no choice but the IMF if its eurozone partners did not produce a firmer plan that would help lift market pressure and lower its borrowing costs.
In a speech before the European parliament, Greek prime minister George Papandreou said it would be impossible for Greece to meet planned budget cuts to solve its debt crisis if it had to continue borrowing money at high interest rates.
The socialist leader said exorbitant borrowing costs were effectively extinguishing the gains Athens stood to make through spending cuts and taxhikes that have prompted protests, strikes and violent clashes in Greece.
“If we keep borrowing at very high rates, and this is the challenge we have, we cannot sustain the deficit reduction that these hard (austerity) measures aim to achieve,” he told a committee of the EU legislature.