France: ECB will help Greece

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 also 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. Baroin said that the eurozone had "come to the edge of the precipice" in the debt crisis, until the decisions announced late on Thursday which amounted to an "excellent", "profound", and "powerful" reponse. French Budget Minister Valerie Pecresse said on 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. In addition "to save the euro is to guarantee to the French that we (France) will be able to take on debt at very low rates and so will not pay such a high rate for our borrowing that we would not be able to finance our social welfare."