EU Poised to Decide on Rescue Plan for Greece

ATHENS, Greece (March 15) -- Greece isn't asking for a bailout. In fact, to do so would be an admission that it has already gone bust.

But well into the throes of a debt crisis that's imperiling the financial future of Europe, Greece and its ill-at-ease European Union partners are considering contingency plans.

EU finance ministers meeting today in Brussels, Belgium, look poised to rewrite the euro's rulebook, fleshing out details of an aid response, if required.

With a budget deficit four times larger than EU rules allow, Greece has faced fierce pressure to put its financial house in order, moving to slash its yawning shortfall from an estimated 12.7 percent of gross domestic product in 2009 to 8.7 percent this year.

Adding to its woes, Greece's staggering government debt hovers at about 113 percent, with two-thirds of that owed to foreign banks.

Earlier this month and after weeks of negotiations with European leaders and currency cops, Athens' socialist government unveiled a $6.5 billion austerity package that includes increasing sales taxes, freezing pensions and cutting civil servants' holiday bonuses by 30 percent.

The emergency cuts, welcomed by European capitals, may or not work. If they don't, politicians and market analysts fear the crisis will test the pain threshold of Europe's single currency, the euro.

"No one wants Greece to default, but no one wants to pay the price of prevention," said a well-placed Athens financial official, requesting anonymity because of his proximity to the bailout rescue talks.

For weeks, European policymakers have been debating the prospects of a rescue plan for deeply indebted EU member states. But the talks are controversial, with Germany and its folk -- proud and protective of economic discipline -- resisting the notion that they may have to dig into their own pockets to rescue an unreliable partner.

Bailouts are barred for member states teetering on the brink of bankruptcy, according to EU policy. What's more, Germany, the biggest and healthiest economy in Europe, fears that any aid package to Greece could be challenged by Germany's powerful constitutional court.

Reports in Greece and other European countries, however, have suggested that such aid would come either in the form of guarantees for Greek bonds or bilateral loans from state-owned banks.

Greek media speculated that the aid package could yield about $34 billion, less than half of the $73.5 billion Athens needs to raise this year.

An EU spokesman, Amadeu Altafaj Tardio, said aid "options" would be submitted when the finance ministers from the 16 euro zone nations convene today, followed by a meeting Tuesday of all 27 EU finance ministers.

Still, leading officials have moved to dampen talk on the scale of a prospective bailout scheme.

"I'm certainly not expecting any decision being made, or any button being pressed, or any button being selected to be pressed, because it's totally premature," French Economy Minister Christine Lagarde said over the weekend.

It was not immediately clear whether German Finance Minister Wolfgang Schaeuble would attend today's talks. Still, the meeting is expected to reveal the extent of euro zone members support for emergency rescue plans.

Such clarity, experts say, would assuage skittish investors and forestall the transfer of funds from one euro zone member to another.

Growing concerns that Greece's financial crisis may spill over to its banking system have compelled the country's wealthier citizens to storm their nation's banks to get their money out.

Private bankers contacted in Greece and Cyprus, a popular tax haven in southern Europe, said as much as $13 billion has left the country for Greek-owned subsidiaries in Switzerland and Cyprus since Athens shocked the EU and global financial markets with its bleak economic forecasts late last year.