Plans emerge for 'European Monetary Fund'

"The commission is ready to propose a European instrument like this that would have the support of eurozone members," the EU's economic and monetary affairs commissioner Olli Rehn told the Financial Times Deutschland, in an article published on Monday (8 March).

Mr Rehn emphasised that any financial aid from a European fund would be linked to "strict conditions." At present, the EU has a balance of payments facility to provide struggling non-eurozone countries with loans, but no mechanism to help the 16 sharing the single currency.

German finance minister Wolfgang Schäuble was the first to come out publicly with news of the radical plans. He said he would "present proposals soon" for a new eurozone institution that has "comparable powers of intervention" to the Washington-based International Monetary Fund.

The IMF gives out emergency loans to countries with troubled finances, although a number of EU governments would prefer to see a European solution to Greece's current financing difficulties.

"We're not planning an institution that would compete with the IMF, but for the internal stability of the eurozone, we need an institution that has the experience and power of the IMF," Mr Schaeuble told the Welt am Sonntag newspaper.

Greece is currently struggling under the weight of its €300 billion-debt pile, with roughly €22 billion up for refinancing this April or May. But a lack of investor confidence in the country's economy has pushed up the centre-left government's borrowing costs and fueled speculation on the need for an eventual bail-out.

The Socialists in the European Parliament and Italian President Giorgio Napolitano have also called for the creation of a European fund.

"The European Central Bank [and] the European institutions are aware that there's something missing from our common tool box to tackle unforeseen and serious crises in one of the eurozone nations," said Mr Napolitano during a visit to Brussels last week.

Officials say a European Monetary Fund is unlikely to be ready in time to help Greece with its current predicament however, with Greek Prime Minister George Papandreou winning verbal support from French President Nicolas Sarkozy after a meeting between the two on Sunday.

"France is by the side of Greece in the most resolute fashion," said Mr Sarkozy. "The euro is our currency. It implies solidarity. There can be no doubt on the expression of this solidarity."

He did not outline any specific measures to help Greece however, but said his finance minister was working on a plan with her European colleagues.

Despite the announcement of stiff austerity measures last week, a meeting between Mr Papandreou and German Chancellor Angela Merkel on Friday also failed to result in the concrete proposal that Greece is hoping for in order to convince investors there is little chance of a default.

Mr Papandreou is scheduled to visit Washington on Tuesday for talks with President Barack Obama, and has indicated his government is prepared to turn to the IMF if greater details of European funding options are not forthcoming.

The latest Greek austerity measures include cutting civil servants' pay, freezing pensions and hiking some taxes, resulting in violent demonstrations on Friday as parliament voted to approve the tough new actions. A 24-hour general strike is planned for this Thursday.