Novinite reported that the Deutsche Bundesbank has warned against using the International Monetary Fund to resolve Greece's debt crisis.

The Bundesbank said in its monthly report for March that "According to its mandate, the IMF can only use the reserves at its disposal to overcome short term balance of payments problems. By contrast, a financial contribution to the solution of structural problems that have no implicit need for foreign currency, such as the direct financing of budget deficits or the financing of bank recapitalizations, is not to be reconciled with the fund's monetary mandate."

The Bundesbank said that the IMF's money is essentially central bank money, as its capital is paid up by the central banks of the countries that are the fund's members. As such, it is a monetary institution whose reserves shouldn't be used to fund budget deficits.

The news comes days after Greek Prime Minister Ms George Papandreou and European Commission President Mr Jose Barroso called on the EU to spell out its rescue plan at the March 25th 2010 to March 26th 2010 summit in Brussels.

It also follows reports that Greece may seek financial help from the International Monetary Fund over the April 2nd 2010 to April 4th 2010 Easter weekend due to little hope for aid from the European Union.

Meanwhile Greece's Prime Minister Mr George Papandreou warned that Athens would not be able to make planned deficit cuts unless it can borrow money more cheaply and said he would prefer not to have to turn to the IMF for help.

He said that "But if we keep borrowing at very high rates, and this is the challenge we have, we cannot sustain the deficit reduction that these hard measures aim to achieve. We should be able to borrow at rates that are normal. We have talked to the IMF, they would have asked us for nothing more. But I would prefer the European solution. I would prefer the European solution as part of the euro zone, as a European."

It may be noted that Euro zone member Greece is under intense pressure from the EU and financial markets to bring down its budget gap, which hit an estimated 12.7% of gross domestic product last year, four times above EU limits. The Socialist government has pledged to cut that deficit to 8.7% of GDP this year, and below the EU's 3% limit by 2012.

(Sourced from www.novinite.com)