Greece's judgment day

26 March 2010 By Hugo Dixon

Other euro zone member states will provide cash but only as a last resort and not at cheap rates. Meanwhile, the IMF will be there to keep Athens from losing resolve during the hard years of fiscal and economic restructuring. Greece and other weak EU countries will benefit.

This content is for Subscribers only

Context News

The leaders of the euro zone countries agreed on a mechanism to provide financial assistance to Greece if needed at a summit on March 25. They said financing would be available only as a last resort and would include a substantial involvement of the International Monetary Fund as well as strong conditions. The leaders also called for a strengthening of the European Union's framework for monitoring countries' fiscal policies to prevent future crises.

The communique said: "As part of a package involving substantial International Monetary Fund financing and a majority of European financing, Euro area member states are ready to contribute to coordinated bilateral loans. This mechanism, complementing International Monetary Fund financing, has to be considered ultima ratio, meaning in particular that market financing is insufficient. Any disbursement of the bilateral loans would be decided by the euro area member states by unanimity subject to strong conditionality and based on an assessment by the European Commission and the European Central Bank."

It continued: "We expect EuroMember states to participate on the basis of their respective ECB capital key. The objective of this mechanism will not be to provide financing at average euro area interest rates, but to set incentives to return to market financing as soon as possible by riskadequate pricing. Interest rates will be nonconcessional, i.e. not contain any subsidy element."

Context News

Email a friend

Please complete the form below.

Required fields *