The 16 nations sharing the euro agreed to offer Greece a standby facility consisting of 30 billion euros (US$40.5 billion) of bilateral loans, Luxembourg Prime Minister Jean-Claude Juncker, who chairs the panel of euro-area finance ministers, told reporters in Brussels yesterday.
The interest due on the loans won’t contain any elements of subsidizing, Juncker said.
Before the announcement Greek Prime Minister George Papandreou said his country may have to use a EU-devised safety net if the country’s borrowing costs do not decline.
The still vaguely worded rescue plan agreed on in Brussels on March 25 was to provide Greece with loans from other eurozone governments and the IMF to help deal with its rising cost of borrowing.
“We battled — and we won the battle — for a European support mechanism to be put in place ... the question is whether this mechanism will convince the markets as a [sort of] gun on the table,” Papandreou was quoted as saying in excerpts of an interview published on Saturday in To Vima. “If it does not, it is an existing mechanism which we can use. This wasn’t, and [still] isn’t our first option, but it is there if we need it as a safety net.”
Greek media reported that eurozone finance ministers and central bank representatives were to teleconference yesterday afternoon to specify borrowing terms for Greece. The reports said the aim was to make the plan more specific before markets open today.
The Greek government hopes that the existence of the plan would convince markets that Europe is prepared to rescue Greece and that this would lead to lower borrowing rates for the heavily indebted country.
Papandreou made it clear that Greece wanted a European monetary fund that would help the country borrow at low rates. He added that the EU is currently “experimenting” with the safety net and expressed the hope that a more “effective” mechanism would eventually be put in place.
“We [the government and other European socialists] had made other proposals that resemble a kind of European monetary fund that would guarantee low-interest loans from the markets ... we must look for a mechanism that will possibly more effective,” he said.
While lauding the March 25 agreement as a “significant big step toward greater European solidarity and deeper cooperation,” Papandreou added that the EU “has lost part of its momentum” and that “sometimes, there is excessive faith that markets are operating properly.”
The prime minister said it is Greece’s responsibility to get out of its present crisis.
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