Wednesday, May 5, 2010

IMF chief sees risk of Greek contagion

* Strauss-Kahn says no real risk for France, Germany

* Countries pulling out of euro zone, would be end of euro

* Rate of lending could have been equal to IMF rate

PARIS, May 5 (Reuters) - The International Monetary Fund's chief said there was a risk of the Greek debt crisis spreading to the rest of Europe, but no real threat for big countries such as France and Germany, a French newspaper reported on Wednesday.

"There is always a risk of contagion," Dominique Strauss-Kahn told Le Parisien newspaper. "Portugal has been mentioned, but it is already taking measures and the other countries are in a much more solid situation ... but we should remain vigilant."

Strauss-Kahn said under the terms of the Greek deal the plan would be monitored every three months, but if outlined austerity measures were not taken the international community "might have to step aside," although there was no suggestion that would happen.

Renewed selling gripped euro zone financial markets on Tuesday as concerns mounted that the record 110 billion euros EU/IMF rescue package for Greece would not stop a debt crisis spreading to other weak euro zone members.

There was no real risk for France and Germany, or other big European countries, Strauss-Kahn said without specifying.

Although European nations have backed the package, there has been criticism of the decision to make Greece pay 5 percent interest on the loans, saying the money should have been offered at a lower rate.

"I think the rate at which the Europeans lent should have been equal to that of the IMF, which is lower by more than half a point," Strauss-Khan said.

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