Eurozone pledges 30 bln euros on Greek rescue package
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Eurozone finance ministers on Sunday hammered out further details of a Greek rescue package, pledging 30 billion euros (41 billion U.S. dollars) in the first year to bail out debt-hit Greece if necessary.
Finance ministers from the 16-nation euro zone held a rare conference call to find a deal on the remaining details of the Greek rescue package after fresh concerns over a debt default by Athens hit the markets and pushed up the borrowing costs of the Greek government.
"We are now operational if the mechanism has to be activated," Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels Sunday after chairing the ministers' conference call. "The initiative for activating the mechanism rests with the Greek government."
Juncker said all euro zone countries would contribute to the bailout package and provide loans to Greece on bilateral basis as agreed by European Union (EU) leaders at a summit last month.
The total amount would be 30 billion euros for the first year, with further support to be decided later on when there is a necessity, Juncker said.
Juncker said the total amount would be shared by eurozone countries in accordance with their capital base in the European Central Bank (ECB), and the bilateral loans would be coordinated by the European Commission and paid via the ECB.
EU Economic and Monetary Affairs Commissioner Olli Rehn told the same press conference that the eurozone loans would carry a fixed interest rate of about five percent for three years, well below current market rates of over seven percent.
EU leaders agreed on a rough standby plan to bail out Greece at their summit two weeks ago, under which eurozone countries would work together with the International Monetary Fund (IMF) to provide emergency loans to Greece when necessary.
However, the plan lacked details, which contributed to increasing market tension over the Greek debt crisis in the past week. The risk premium that investors charge to hold Greek debt rather than benchmark 10-year German bonds hit a record 454 basis points on Thursday, invoking suspicion that Athens may be forced to ask for financial support very soon.
Rehn said the commission, in liaison with the ECB, would start working on Monday with the IMF and the Greek government on the joint bailout program, including amounts and conditionality.
Rehn suggested eurozone countries would pay for two-thirds of the total support to Greece, leaving the IMF responsible for the one-third, but he said the IMF loans may be at a more preferential interest rate.
With a majority of Germans against aid for Greece, Berlin has insisted any interest rates on the loans should be non-concessional, i.e. not contain any subsidy element.
"If the mechanism had to be activated, it would not be a violation of the no-bailout clause (in the EU treaty) since the loans are repayable and contain no element of subsidy," Juncker said.
Meanwhile Juncker stressed that Greece has not called for an activation of the bailout package, adding it remains the right of Athens to ask for support.
He said data provided by the Greek government showed encouraging progress in its fiscal consolidation efforts and Athens was on track to reach this year's target of cutting its deficit to 8.7 percent of gross domestic product.
European Commission President Jose Manuel Durao Barroso said he was extremely pleased with the agreement reached Sunday among the eurozone members on all the remaining details of the coordinated European response to provide financial support to Greece if needed.
"With today's agreement, Europe has shown that responsibility and solidarity can go together," he said.
President Van Rompuy, President of the European Council, also welcomed the agreement.
"The agreement today makes the mechanism fully operational and will contribute decisively to the financial stability of Greece and the euro zone," he said.
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