Greece says EU could intervene, mechanism in works

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Greek Prime Minister George Papandreou said on Wednesday the EU stood ready to intervene if speculation against his country's debt continued and euro zone sources said finance ministers would discuss next week a mechanism to support Greece.

German and French leaders meanwhile made clear the idea of creating a European Monetary Fund faced big hurdles and could not solve the bloc's immediate debt crisis.

Papandreou told reporters in Washington that "if speculation ... against Greece continues", ideas were being discussed in Europe for the EU to "enter the fray and intervene".

"The way to stop speculators ... is to make them feel that they will lose their money with the intervention of the EU, with instruments which have not been operationalised yet, but have been discussed and set in motion," he said.

In Brussels, sources involved in preparations for a meeting of euro zone finance ministers next Monday said they would discuss a support mechanism that Athens could use to finance its borrowing if necessary.

They gave no details but officials have talked of the possibility of German and French state banks either buying Greek bonds or guaranteeing purchases by commercial banks.

The finance ministers are likely to stress at their meeting next week that Greece is able to finance itself on capital markets for now, holding any mechanism in reserve.

Struggling with a debt mountain of around 300 billion euros -- equivalent to 125% of its national output -- Athens needs to roll over some 20 billion euros in debt between April 20 and the end of May and is urgently seeking to reduce its borrowing costs.