Greece deal
March 16, 2010
Euro-zone finance ministers sealed agreement on a strategy to mobilize aid to financially beleaguered Greece - but only if absolutely necessary.
Officials did not give full details of the deal, which would only be put into effect if European Union auditors determined that Greece was fighting a losing battle to resolve its economic woes.
Luxembourg's prime minister, Jean-Claude Juncker, who chaired the talks, said ministers had clarified details "that will allow us to take a decision on a coordinated action, which could be activated swiftly in the case of need."
But he remained vague about how a rescue package would operate, only ruling out granting loan guarantees - which would involve the rest of Europe taking some liability for debt, which Greece might fail to repay.
"The instrument would not consist of loan guarantees from euro-area countries to Greece but probably of a coordinated action at European level, which would make bilateral aid available," he said. "All members of the euro zone will participate in this collective effort."
The "technical details" would still have to be worked out, Juncker said.
All 27 EU countries would have to take a final decision, although only the 16 euro-zone countries would provide any aid.
A statement from the Eurogroup meeting said the "objective would not be to provide financing at average euro area interest rates, but to safeguard financial stability in the euro area as a whole."
Struggle to finance debts
Greece is struggling with a 300-billion-euro ($410 billion) budget deficit and needs to raise 54 billion euros this year purely to finance its debts. The country has sold government bonds to refinance its debt, and analysts have said aid would only be necessary if Athens were unable to sell more.
Dutch Finance Minister Jan Kees de Jager said that aid for Greece would "follow the same methodology" as that provided by global crisis lender the International Monetary Fund. Such conditions would mean the imposition of drastic reforms and budget cuts.
As Europe's biggest economy, Germany is reluctant to bail out Greece and is demanding to see an effort from the country to repair its own finances.
Athens this month unveiled extra austerity measures, including cuts in public sector pay and tax increases, with an aim to reduce deficit from 12.7 to 8.7 percent of gross domestic product.
rc/AFP/dpa/Reuters
Editor: Nancy Isenson