Europe announces a fresh, ‘credible’ Greek rescue deal

Deutsche Welle, 22 July 2011 


Greece’s second aid package is
larger than the first
European leaders say the eurozone, the International Monetary Fund and the private sector will all contribute towards a second package of emergency loans for Greece, as a debt-dominated summit concludes in Brussels.
European Union President Herman van Rompuy said after Thursday’s summit in Brussels that the bloc had reached three important decisions which had unanimous support within eurozone.
“We improved the Greek debt sustainability, we took measures to stop the risk of contagion, and finally, we committed to improve the eurozone’s crisis management,” Rompuy said in the opening moments of his official address.
The EU president said that the instability of the Greek economy, coupled with the resultant jitters on international markets, ultimately could have threatened the single European currency and the economic recovery in Europe and the wider world.
“Convening this meeting focused the minds and accelerated finding a solution. I could not allow a difficult situation to become a dangerous one,” Rompuy said.
The nuts and bolts
European leaders in conjunction with the International Monetary Fund (IMF) agreed to lend Greece an additional 109 billion euros (157 billion dollars) in order to cover its financing shortfalls and prevent Athens from defaulting on its sovereign debt.
The program will include lower interest rates and extended maturities as well as a voluntary contribution from private sector financial institutions amounting to 37 billion euros, according to a statement released by the leaders after the summit.
Merkel and Sarkozy struck an
agreement before the summit
European Central Bank chief Jean-Claude Trichet reacted coolly to concerns that even voluntary participation by the private sector could provoke rating agencies to downgrade Greece’s credit worthiness.
“I don’t think experts consider that what has been done would trigger a credit event,” Trichet said after the summit.
‘European package’
Greece’s second aid package, including private contributions, will total at least 146 billion euros. The package comes in addition to the 110 billion euros Athens was promised as part of its first bailout in 2010.
“The only thing we’re asking for is the right to make deep changes in our country to make our country a viable one, one of growth and jobs creations,” Greek Prime Minister George Papandreou said. “This is a European success, a European package.”
The breakthrough deal was made possible after German Chancellor Angela Merkel and French President Nicolas Sarkozy came to an agreement in Berlin on Wednesday.
Sarkozy said that Europe was prepared to stand with Athens and guarantee its credit worthiness in the event that credit agencies declare Greece in limited default.
“We have agreed to create the beginnings of a European Monetary Fund,” he said.
Author: Spencer Kimball, Mark Hallam (AFP, Reuters, dpa)
Editor: Joanna Impey


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