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UPDATE 2-IMF says not asked to assist in Greece budget woes

Published 12/10/2009, 04:32 PM
Updated 12/10/2009, 04:36 PM

(Adds details, background)

NEW YORK, Dec 10 (Reuters) - The International Monetary Fund has not been asked to take on any official role in assisting the Greek government cope with its growing budget problems, a senior IMF official said on Thursday.

"We would become involved only with the request of the European authorities, and it goes without saying the Greek authorities. Has that occurred? No," the IMF's first deputy managing director, John Lipsky, told reporters after a speech at the Japan Society in New York.

As an IMF member Greece can tap the Fund's technical expertise at any time but the government has not requested a mission to officially help deal with the budget deficit that has turned out to be twice as big as previously reported.

As a euro zone member it is more likely that Greece would first turn to the European Union for assistance.

Markets were unnerved after Fitch Ratings this week cut Greece's debt to BBB-plus on Tuesday with a negative outlook, citing fiscal deterioration in the euro zone's weakest member. It is the first time in a decade that a major ratings agency put Greece below an A grade. For more see [ID:nGEE5B70TN].

Concerned European governments have pressed Athens to sort out its strained public finances. Greece's finance minister, George Papaconstantinou, vowed to do whatever it takes to fix the deficit problems and to cut it from an expected 12.7 percent of gross domestic product this year to 9.1 percent in 2010. [IDnGEE5B9161]

While EU leaders have insisted Greece is not likely to default and therefore not need aid from EU states, markets have continued to react to the uncertainty around how Greece is going to bring its budget under control.

In August, the IMF said in its annual review of the Greek economy that wage growth and inflation were higher than the euro zone average and the competitiveness of the Greek economy was therefore suffering.

The IMF urged Greece in the review to devise and implement a comprehensive plan for fiscal consolidation and reforms, including measures to deal with a rapidly aging population. (Reporting by Daniel Bases; Writing by Lesley Wroughton; Editing by James Dalgleish)

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