Germany says Greece has its 'full support'

German foreign minister Guido Westerwelle has thrown his country's "full support" behind Greece, as the southeastern EU member state continues to battle its ongoing debt problem.

"Athens has the full support of Germany and all other European Union member states on the issue," said Mr Westerwelle in an interview with Greek daily Kathimerini on Sunday (31 January).

Mr Westerwelle is scheduled to travel to Athens on Tuesday for talks with Greek Prime Minister George Papandreou and finance minister George Papaconstantinou.

The public pronouncements are the latest in a complex game being played by senior European politicians as they seek to both calm financial markets but also maintain pressure on the Greek administration to put its public finances in order.

Investors have grown increasingly jumpy over the possibility of the Greek government defaulting on its debt obligations, with the yield on Greek 10-year bonds last week hitting its highest level since the country joined the eurozone in 2001.

This has greatly pushed up the cost of money, with the government seeking to borrow around €54 billion this year.

Bilateral rescue?

On Saturday German economy minister Rainer Bruederle ruled out the possibility of a rescue for Greece.

"I don't think that a bailout is the right way because German and French taxpayers can't pay for Greece," Mr Bruederle said in a interview on the sidelines of the World Economic Forum in Davos, Switzerland.

"Maybe they will give certain help, but first it's for the Greeks to solve their problems," he added, refusing to go into details.

Speculation that Germany and France would come to the aid of Greece increased last week after an article in the French daily Le Monde said the two countries were exploring the possibilities of providing bilateral loans, subsequently denied by both governments.

EU officials say there are no formal talks regarding a potential Greek bailout taking place within the bloc's institutions, but privately admit informal discussions are ongoing in a number of capitals.

A "no bailout" clause was placed at the heart of the 1991/92 Maastricht treaty setting up a European monetary union, largely at German insistence, with the aim of preventing the budgetary problems of one country spilling over and damaging the credit rating of the group as a whole.

Under Article 122 of the Lisbon Treaty however, any member state "seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control" could receive financial assistance from other EU members.

A number of senior EU politicians have made apparent references to the clause, with the recent financial crisis likely to qualify as an "exceptional occurrence".

Any financial support for Greece is likely to come with conditions however, with the European Commission set to tell the country's administration this Wednesday to cut public sector wages and improve tax collection, according to a draft opinion seen by the Financial Times.

While the EU frets over how and when to provide support to euro area members such as Greece, several non-eurozone EU states have obtained funds from the bloc's balance of payments assistance facility.

Latvia, Hungary and Romania have all received EU/IMF-led loans.