Brussels, 23/04/2010 (Agence Europe) - On Friday 23 April, Greek Prime Minister Georgios Papandreou announced that he had instructed Finance Minister Georgios Papaconstantinou to request the activation of the EU-IMF financial support package (coordinated bilateral loans), as agreed on 26 March by heads of state and government and as subsequently set out by Eurogroup finance ministers on 11 April. Officials from the European Central Bank (ECB), the IMF (International Monetary Fund) and the European Commission are already in Athens to determine the parameters for the financial support and the conditions under which the support is given, the Commission said at a press briefing.
“We will stick to the agreed running order,” said the spokesman for Economic and Monetary Affairs Commissioner Olli Rehn: that is, the European Commission, in contact with the ECB, will issue an opinion on the need for the aid to be activated following Greece's request; - in the light of the Commission (and ECB) opinion, the Eurogroup will take a formal decision to activate the mechanism.
The Commission points out that it is a “single” joint EU-IMF mechanism. It will be a “little time” before the money can be made available. Firstly, the programme has to be drafted, something which the Commission does not expect to pose any problems since the views of the Commission, the IMF and the Eurogroup seem to be quite close with regard to “the diagnosis and remedies to be applied”; the Greek authorities have done what was required to make the target for deficit reduction in 2010 attainable. Secondly, the countries of the euro area have to approve the provision of funding for the mechanism, with a cost-sharing formula and known sums, Rehn spokesman said, adding that all the members of the euro area would be involved in the mechanism and would try to ensure that the monies were made available quickly.
Calculation of the interest rate on the loans to Greece to be applied by the euro area will be done once the funding has been made available (the rate was 5% on 11 April, when the Commission presented a simulation). Rates have been rising over the last few days, but the Commission says that the mechanism should “offer Greece financial assistance at low rates to help it refinance its public debt”.
The aid will extend over three years, and will cost the EU €30 billion in the first year, 2010, (there is talk of a further €15 billion from the IMF). Greece, whose debt is almost €300 billion (125% of GDP), will have to pay back €30 billion by the end of the year.
It will be up to Eurogroup President Jean-Claude Juncker to decide whether a formal meeting of the group will be needed for a decision to be taken.
“The time has come to implement the decision we all took together with our partners,” said Papandreou, in a speech broadcast on Greek television from the port on the little island of Kastelorizo. “Our partners will do what is necessary to offer us a safe haven where we can make our vessel seaworthy again … and to send the message to the markets that the European Union is not playing games and will protect the euro,” he added. He said that Greece would have preferred not to have to ask for aid, hoping that the promise of European aid “would have been enough to calm the markets”.
The Spanish government said on Friday that it was “satisfied” with Greece's activation of the EU-IMF aid plan, and expressed the hope that the situation in the country would begin to improve.
Might there be a link between publication on Thursday 22 April of Greece's new deficit figures (see EUROPE 10124) and the request the following day for activation of aid? The Commission made no comment on this question, but took the opportunity to make things clear: the scaling up of Greece's deficit was not “a blow dealt to the credibility of Greece - it is quite the opposite. What happened yesterday should enhance the credibility of the Greek statistics and the efforts of the Greek authorities to redress the situation. The Greek authorities are cooperating daily with Eurostat to bring order, transparency and reliability to the statistics,” Commissioner Rehn's spokesman pointed out. (L.C./transl.rt)