Greece Plays IMF Card in High-Stakes Showdown

ATHENS, Greece (March 18) -- George Papandreou hates poker. But for the past month or so, the bewildered Greek leader has been trying to make the most of a weak hand in a three-way poker game involving his country, the European Union and fidgety financial markets.

The stakes are high, and the fate of Europe's single currency is at risk. But pressed to prevent that disaster, the normally placid Papandreou has now turned brassy.

In the political equivalent of an all-in bet at the poker table, the Greek leader this week threatened to turn to the International Monetary Fund for financial help unless European Union leaders agreed on an acceptable rescue plan to help his country stave off the euro zone's first default.

"Nothing is excluded," Papandreou warned after talks with European Commission chief José Manuel Barroso in Brussels, Belgium, on Wednesday. "If we realize that we will be borrowing at extremely high rates, there are other options."

A day later, Papandreou appeared to be hedging his bets, though, saying that Greece wants to "make it on our own."

Greece desperately needs $27 billion in the next two months to roll over expiring debt. But months after unveiling a yawning budget deficit that is 12.7 percent of gross domestic product -- more than four times the EU's cap of 3 percent -- borrowing costs have skyrocketed as investors, wary of Athens' ability to rein in its runaway finances, pushed the cost of Greek debt to more than three percentage points higher than German bonds.

To appease Germany (Europe's economic taskmaster), protect the euro and satisfy skittish investors, Papandreou and his newly elected socialist government announced draconian budget cuts this month, including increased sales taxes, pension freezes and a 30 percent cut on civil servants' holiday bonuses.

In exchange, the Greek leader hoped to secure financial and regulatory support from Europe. But vagueness, instead, has dominated Brussels and Berlin.

Earlier this week, EU finance ministers backed a rescue plan for helping Greece if it needs financial aid. But since then, officials have refused to spell out what that would entail, propelling Papandreou to puncture looming uncertainty with public threats that he would take Greece's debt crisis to the IMF -- a move considered anathema by some senior EU officials.

Is Papandreou bluffing? No one knows. But neither does anyone know the real intentions of the other key players.

Despite strong European representation in the fund, the IMF, based three blocks from the White House, has long been considered an American-influenced institution. Greece is already receiving technical help and advice from the fund. But allowing it to come to the rescue of a euro zone country would be a grave admission of the EU's inability to handle its own affairs.

"Playing the IMF card increases the pressure on the EU and on other member states [to act]," Alexandros Tokhi, a political scientist at Berlin Free University, told The Associated Press.

Indeed, Papandreou's remarks sparked a flurry of reports that an IMF loan to Greece would likely come at a rate as low as 3.25 percent, significantly lower than EU-pitched proposals.

Still, in a bizarre twist and just hours after the Greek leader made his remarks, Angela Merkel, the German chancellor who is described by friends and foes as a consummate political poker player, dismissed the need for "a quick act of solidarity to Greece."

Rather, she told the German Parliament late Wednesday, "the right answer is to seize the problem at the roots. Therefore, there is no alternative to the Greek savings program."

One of Merkel's top advisers also followed up, suggesting that it might, in fact, be best for Greece to call in the IMF.

"We have to think who has the instruments to push Greece to restore access to capital markets. Nobody apart from the IMF has these instruments," said Michael Meister, finance chief in the Bundestag.

The result: compounded confusion that had European stock markets slipping as much as 0.3 percent on Thursday, the euro shedding more of its value, and Greek media biting back with blistering remarks against Germany.

"Greece will hold up," said the main editorial of the leftist-leaning Eleftherotypia daily. "The European Union, though, will not endure Merkel's German arrogance."

Don't bet on it. By late today, and after a Dow Jones news report quoted an anonymous senior Greek official as saying that Athens may apply for IMF aid over the April 2 Easter weekend, Papandreou was backpedaling on his threat.

"We want to make it on our own. That's why we are not seeking financial aid," the prime minister said after a cabinet meeting and as the euro tumbled against the dollar. "With the efforts and sacrifices of all of us, we will make it, provided that our country can borrow on reasonable terms."