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UPDATE 2-INTERVIEW-EU explores raising funds for crisis aid

Published 03/02/2009, 04:01 PM
Updated 03/02/2009, 04:16 PM

(Adds Lagarde inflation comment in newspaper)

By Anna Willard

BESANCON, France, March 2 (Reuters) - European Union finance ministers are discussing different financing options to help countries that are in difficulty because of the economic crisis, French Economy Minister Christine Lagarde said on Monday.

Asked if she was in favour of a euro zone debt issue to raise money to help such countries, Lagarde told Reuters: "I and my finance minister colleagues are exploring all the different tools that are available to fight the crisis."

EU leaders rejected a mass bailout of Eastern and Central European economies at a weekend summit, and the region's currencies plunged on Monday as market players showed their disappointment at the lack of a unified approach to the crisis.

However, EU leaders said they would help individual new members of the union that have been hit particularly hard.

There has also been speculation that stronger EU members could come to the aid of Ireland or Greece, which have been pummelled by the crisis and are being forced to pay hefty premiums over healthier bloc members to finance their debt.

"Today there's no debate on Ireland, Greece and Portugal, and yet spreads have narrowed markedly," Lagarde said.

Lagarde said a joint euro zone bond issue to alleviate financial pressue on more fragile members was one financing option, but that ministers were not on a "common track" on the subject. Germany has opposed the idea.

France is poised to slash its economic forecasts for 2009. Asked if she thought the outlook cut would lead to a large rise in French debt issues, Lagarde said, "Not particularly, no."

Later in the day, Lagarde was quoted by newspaper Metro as saying she expected consumer prices to track a fall in raw material prices this year.

"Given the fall in (commodities) prices in the last half-year, starting from now, we should see more marked (consumer) price falls," she told Metro.

In 2008, inflation had been 3.6 percent she added. "In 2009, it should not exceed 1 percent." (Writing by Sophie Hardach; Editing by Crispian Balmer/Victoria Main and Leslie Adler)

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