“It’s quite clear that economic policies are not just a matter of national
concern but European concern,” José Manuel Barroso, European Commission
president, told reporters in Brussels.

According to high-level EU officials, Greece would in the last resort receive
emergency support in an operation involving eurozone governments and the
Commission but not the International Monetary Fund.

Eurozone countries and EU authorities are reluctant to spell out how they
would assist Greece, for fear that it would relax pressure on Athens to
attack its problems and unsettle rattled financial markets.

Cutting public expenditure
The immediate priority is for Athens to demonstrate that it is serious about
cutting public expenditure, improving tax collection, publishing reliable
financial statistics and tackling corruption, the officials said.

“Greece has to sort this out itself. That is the issue,” a French official
said.

Mr Barroso said “the best way to help Greece is for Greece to respect its
obligations under the stability and growth pact”, a reference to the EU’s
fiscal rules.

His message was echoed by José Luis Rodríguez Zapatero, Spain’s prime
minister, who said: “The euro club is a strong club with strong ties and
reciprocal support. Let no one be mistaken about that.”

They were speaking as anxiety over Greece rose in financial markets, driving
Greek bond yields up to 7.25 per cent, closing on Hungary, a non-eurozone
state bailed out by the EU and the IMF in 2008.

Greek yields have risen by more than one percentage point this week and by
three percentage points since October.

Prime minister Papandreou
George Papandreou, Greece’s prime minister, blamed “malicious forces” for
stories about Athens seeking funds from China and elsewhere, which helped
trigger the turmoil. He said Greece had proved its ability to raise funds
with a €8bn bond issue on Monday which was heavily oversubscribed.

But some investors warned they might shun Greek debt, accusing Greek ministers
and bankers of mishandling the bond issue, which left some funds nursing
heavy losses.

Signs of trouble in other eurozone countries persisted as Portuguese
government bond yields hit a six-month high after ratings agencies gave a
lukewarm response to the government’s deficit-cutting plans. The euro
touched a fresh six-month low of less than $1.40 and hit a five-month trough
against sterling.

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