Eurozone members have made a commitment to providing up to €30bn in loans to Greece over the next year to help stave off a debt crisis that has roiled financial markets and posed the most serious challenge to the euro in its history.
Those funds were agreed during an extraordinary teleconference of eurozone finance ministers on Sunday and would be supplemented by contributions from the International Monetary Fund that could yield an additional €15bn (£13.2bn, $20.2bn) according to European officials.
The rates charged to Athens would be around 5 per cent for a three-year fixed loan – above the IMF’s standard lending rate but below those currently demanded by jittery investors. Two-year Greek bonds were last week trading at 7.45 per cent.
At a press conference in Brussels on Sunday, European officials presented the three-year package as the detailed commitment that financial markets have been demanding after a series of vague communiqués failed to ease the crisis.
“This is the step of clarification the markets are waiting for,” said Jean-Claude Juncker, the Luxembourg prime minister and eurogroup president. “It shows there is money behind this.”
IMF managing director Dominique Strauss-Kahn said the eurozone agreement marked “an important step”, adding that the IMF was ready to contribute financing when necessary and would hold talks in Brussels Monday with the Commission and Greek authorities.
In Athens, George Papaconstantinou, Greek finance minister, made clear that the government had not yet asked for the money, and expressed confidence that the very existence of the package would allow his country to access debt markets at sustainable rates.
“We believe we can continue to borrow on the [international capital markets] without obstacles,” Mr Papaconstantinou said.
A key test of market sentiment will come on Monday, when Greece will attempt to raise €1.2bn through the sale of three and six-month paper.
Details of the rescue package were the result of months of sparring among eurozone members that revealed deep divisions about how to address the immediate crisis as well as broader disputes over economic governance.
One of the most contentious issues was interest rates, with Germany insisting that Greece pay “market rates” and France and other eurozone members pushing for easier terms.
Olli Rehn, Europe’s commissioner for economic and monetary affairs, insisted that the pricing agreed by the 16 eurozone members did not constitute a subsidy for Greece. Their contributions to any rescue would be proportional to their capital commitments to the European Central Bank, leaving Germany with the largest share.
Representatives from the Commission, the ECB and the Greek government will meet with the IMF on Monday to negotiate additional features of the package, including conditions that would be imposed on Athens and the exact size of the IMF contribution.
Additional reporting by James Wilson in Frankfurt
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