Germany and France split over solution to Greek financial crisis

The split between Europe’s leaders over aid to Greece widened yesterday as Germany softened its opposition to a bailout by the International Monetary Fund and France insisted on a European solution to the crisis.

As Berlin and Paris bickered over the politics of IMF intervention in the eurozone, an outspoken board member of Germany’s central bank said that Greece had not done enough to mend its finances. Asked what Greece should do if it could not refinance its debt, Thilo Sarrazin said: “Then it should do what every defaulter has to do and file for insolvency.”

The European Commission urged member states yesterday to make a political commitment to a standby rescue plan. A summit meeting in Brussels next week will address Greek warnings that soaring borrowing costs may jeopardise its efforts to cuts its budget deficit. Greece threatened this week to call on the IMF for aid if Europe failed to come up with concrete proposals for a rescue package.

Olli Rehn, the Economic and Monetary Affairs Commissioner, said that the European Union must “come to a more specific political conclusion about the European framework for co-ordinated and conditional action, if needed and required”.

The French Government waded in to support Greece, however, stating that the priority was to find a European solution to the crisis, suggesting it was premature to talk about an IMF loan.