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Euro zone agrees bailout for Greece
(Agencies)
Updated: 2010-03-13 09:24
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LONDON - The euro zone has agreed a multi-billion euro bailout for heavily indebted Greece as part of a package to support the euro, the Guardian newspaper reported on Saturday.
The 16 euro zone members have agreed on "coordinated bilateral contributions" in the form of loans or loan guarantees to Greece if Athens is unable to refinance its debts and asks the European Union for help, the Guardian quoted a senior European Commission official as saying.
The agreement was reached despite strong resistance by Germany, and Berlin has played the pivotal role in organising the deal, the paper quoted other sources as saying.
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The aid to be made available by the bailout could reach 25 billion euros, the paper quoted its sources as saying. Greece's borrowing needs for the whole of 2010 total 53.2 billion euros.
Greece, labouring under a crippling debt burden, announced a 4.8 billion euro package of austerity measures last week designed to reduce its budget deficit to 8.7 percent of GDP this year from 12.7 percent in 2009.
It has been paying a high premium over benchmark European bonds to raise funds, the yield spread of 10-year Greek government paper over bunds topping 400 basis points in January.
The bailout "will be a coordinated approach of bilateral contributions ... a bilateral contribution can be a loan or a loan guarantee. The guarantees will facilitate the kind of funds potentially needed in this context," the paper quoted the senior Commission official as saying.
The agreement has been tailored to avoid breaking the ban, in the rules governing the operation of the euro currency, on a bailout for a country on the brink of bankruptcy, and to avoid a challenge by Germany's supreme court, the official said.
The Commission is also rushing through tougher rules for the euro zone to set up rigorous "budgetary surveillance" of the 16 member states, the Guardian said. Greece has in the past provided the European Union with misleading economic statistics.
"The Greek case is a turning point for the euro zone," the Guardian also quoted EU Economic and Monetary Affairs Commissioner Olli Rehn as saying in an interview with it and other European papers.
"If Greece fails and we fail, this will do serious and maybe permanent damage to the credibility of the European Union. The euro is not only a monetary arrangement but a core political project of the European Union ... in that sense we are at a crossroads."
Rehn said he would propose next month a regime of "rigorous surveillance of national budgets" including giving Eurostat, the EU statistics agency, big new auditing powers over the accounts of euro zone member states.
