–Adds More Comments, Quotes

BRUSSELS (MNI) – If Greece goes to the International Monetary Fund
for aid, the euro and the credibility of the Eurozone could suffer,
European Central Bank Governing Council member Vitor Constancio said on
Tuesday.

Debt-stricken Greece is grappling to manage a budget deficit more
than four times the EU’s stipulated 3% limit, and many market
participants say it could need external assistance to service its debts.
But European leaders are divided over whether support, if needed, should
come from within the Eurozone or from an international body,
particularly the IMF.

“Going to the IMF, as a member of the euro area, could be
interpreted internationally as some sign of weakness of our framework…
and that would be detrimental to the euro,” Constancio, who heads the
Portuguese central bank, said.

“Regarding the IMF, well, as I think President Trichet said, I am
not in favour of saying that Greece should go to the IMF for a
programme,” Constancio said.

“We have the means to aid Greece ourselves,” he said. “The European
framework is capable of dealing with the problem.”

He said that the two functions of the IMF, providing a programme
for debt reduction and lending money, could be done at the European
level.

He noted that Greece already had a comprehensive budget programme
which was supervised by the European Commission, so there is “no added
value from the IMF in that respect.”

“The role of the IMF is to be a catalyst…and that’s something
that Europe can do and should do,” he said.

Issuing Eurobonds to support an indebted Eurozone country isn’t an
option, because that would contravene the “no-bailout” clause of the EU
treaty, Constancio said.

“It is forbidden for one country to assure debt for another,” he
said.

“But of course credit is not a bailout, credit is credit,”
Constancio added. He said credit that isn’t subsidized “cannot be
considered a bailout” but could be regarded as “short term liquidity
support.”

Asked about the creation of a European Monetary Fund to solve
future problems, Constancio said:

“It is still unclear to me what this European Monetary Fund could
do, which could not and should not have been done by the guardian of the
Stability and Growth pact.”

He a support framework could be created within current EU laws.

“In my view it’s not necessary to revise the Treaty,” he said.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

[TOPICS: MT$$$$,M$$FX$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]