Ready… aim…

13 April 2010 By Neil Unmack Follow @unmack1

The euro zone hopes promising lots of aid will reassure markets so much that a bailout isn’t needed. That’s similar to what Hank Paulson hoped to do with Fannie and Freddie. The former U.S. Treasury boss ultimately had to fire his bazooka and so probably will the euro zone.

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Greece sold 1.56 billion euros of 6month and oneyear bonds April 13, its first issue after the details of a potential euro zone rescue package were announced.

Euro zone finance ministers agreed on April 11 on the amount and the interestrate formula for a Greek financial bailout, while stressing that Athens had not requested the plan be activated yet.

Ministers said that Greece would be able to borrow up to 30 billion euros for a threeyear period. Interest rates would be calculated according to a formula that would end up charging Greece 5.3 percent a year for fixed rates, and 4.1 percent for variable rates in current market conditions. Greece would pay the Euribor threeyear swap rate plus 300 basis points plus a service charge of 50 basis points for fixedrate borrowing. For floating rate money, it would pay the threemonth Euribor rate plus the same premium.

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