MercoPress. South Atlantic News Agency

Greece closer to the IMF; Euro plummets below 1.36 US dollars

Prime Minister George Papandreou said Greece needed an “instrument” to stop speculation

News that Greece may go cap in hand to the IMF for help with its debt crisis prompted investors to rush for the relative safety of the dollar, which soared against the Euro on Thursday. The Euro fetched 1.3603 dollars down more than a US cent on late trading.

Greek Prime Minister George Papandreou said his country would go to the International Monetary Fund for cash if fellow European Union members failed to step in, sending the Euro plummeting to a day low of below 1.36 dollars, before a modest recovery.

“This is where Europe must come in and say 'OK in this case we either can provide what an IMF would provide... or in the end Greece may have to choose the option to go to the IMF,'” Papandreou told the European Parliament in Brussels.

Germany, which has been reluctant to offer any bailout to Greece, hinted that it was open to the idea of letting Athens call in the IMF, a notion dividing the Euro zone.

Traders also boosted the dollar on rumours that the Federal Reserve could raise the price of its lending to banks, the so-called discount rate.

Addressing the European Parliament PM Papandreou stressed that Greece is not asking the EU for money, but rather for an “instrument” that can be used, if necessary.

“When you have that 'instrument' in place, it is sufficient to stop the speculation and give the time required for the reforms to yield, given that the high cost of borrowing undermines both the measures taken by the Greek government and the prospects for development” Papandreou told a EP Committee.

Asked if Greece is seeking a political decision of support at next week's EU Summit, Papandreou said that, from his meeting on Wednesday with European Commission president Jose Manuel Barroso, he is aware that the Commission is prepared to endorse a mechanism, adding that “we are expecting this from the Summit...not only Greece, but other member countries as well, as I surmise from the questions addressed to me today in the European Parliament”.

European Parliament president Jerzy Buzek agreed with Papandreou's view, stressing that the entire situation also comprises, in tandem, a good opportunity for the Euro zone to create mechanisms that will avert crises.