France says ECB will help Greece, despite any default rating

22nd July 2011, Comments 0 comments

The European Central Bank will continue in its central role as lender to the Greek banking system, even if rating agencies declare Greece to have partly defaulted on its debt, French Economy Minister Francois Baroin said on Friday.

Baroin was referring to a threat by the ECB, before the eurozone decisions to rescue Greece late on Thursday, that a bailout which triggered a default rating would cause it to cease lifeline funding for Greek banks.

Baroin said on French RTL radio that any decision on a selective default was "a matter for the rating agencies", and that "they will do as they wish."

But he said that even if the agencies "take this decision, the ECB will continue to play its central role as lender."

He also said that the European support fund was now more flexible and "would be able to intervene as a precaution to prevent any attack by investors or speculators" against another fragile eurozone member.

Baroin repeated an assurance given by French President Nicolas Sarkozy late on Thursday that private creditors such as banks, insurance companies, pension, investment and hedge funds, would not be called in to help other countries as was the case with Greece.

"There is no question, not for a second, that the private (sector) will find itself called on a voluntary basis (to help) Portugal, Ireland which are two other countries" being rescued, he said.

French Budget Minister Valerie Pecresse told RMC Info radio that if Greece had not received this second rescue, the cost for France in terms of an increase in interest rates and loans would have run into "several billions of euros per year."

That would have made completion of the French budget programme for next year extremely difficult.

But Francois Hollande, a key contender for the opposition Socialists' 2012 presidential nomination, said the rescue plan, while necessary, was "late and insufficient."

He said on France Info radio that "there's a relief, the markets will be appeased for a certain amount of time, especially given that states are making the main effort," but also said "we remain vulnerable and there's much still to do."

He said: "If these measures had been taken 18 months ago, there would never have been a eurozone crisis.

"Because there were prevarications, hesitations, contradictions between (German Chancellor Angela) Merkel and Nicolas Sarkozy successive short-sighted plans ... without serious content, were unable to curb speculation."

He said: "The economic governance of the eurozone hasn't really progressed."

The latest opinion poll published on Friday said that Hollande would roundly beat Sarkozy in next year's presidential election, 28 percent to 25 percent in the first round and 57 percent to 43 percent in the second round.

© 2011 AFP

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