Euro ministers say have Greek aid plan

16/03/2010 07:15:28

Finance ministers from the 16-country euro zone agreed on Monday to mobilise financial aid for Greece rapidly if needed but revealed little of how their standby plan for the debt-stricken nation would work.

After talks in Brussels, the ministers published a statement saying they had agreed the technicalities of what would be the first rescue in the history of the monetary union that gave birth to the euro in 1999.

Market prices for Greece's debt initially rose on hopes of a more detailed commitment by the meeting, but analysts said a failure to give one could spark more selling..

"It (the Eurogroup of ministers) clarified the technical modalities enabling a decision on coordinated action and which could be activated swiftly in the case of need," the statement said.

"The objective would not be to provide financing at average euro zone interest rates, but to safeguard financial stability in the euro area as a whole."

Jean-Claude Juncker, Luxembourg prime minister and chairman of the talks, said Athens had not requested help and that such aid, if deployed, would not involve loan guarantees, one of the options mooted ahead of the Brussels gathering.

"We think the question (of aid for Greece) will not arise," Juncker told a news conference.

European Monetary Affairs Commissioner Olli Rehn said Greece was taking bold action to reduce its deficit and rein in a debt that is worth more than its economic output.

He and Juncker stuck to the statement's terms and fended off questions about how much money would be involved or what constituted the so-called technical modalities.

Austrian Finance Minister Josef Proell said Monday's talks did not focus on how much money to have on standby.

"Today there was no discussion at all of sums," he said.

Greece this month unveiled extra austerity measures to knock its deficit from 12.7 to 8.7 percent of gross domestic product, including cuts in public sector pay and tax hikes. A poll on Sunday showed most Greeks saw it as a good step.

The measures and the euro zone's verbal backing have helped ease the premium Greece must offer over benchmark German bonds as it seeks to refinance some 20 billion euros (18.25 billion pound) in debt that it has to roll over in April and May.

But the so-called spread, or debt financing premium, remains unsustainable, analysts say. Policymakers are looking at what could be done to insulate Athens against market turbulence and a risk of default that has hurt the euro.

NO DETAILS

French Economy Minister Christine Lagarde said the aim had been to agree "the technical modalities of the plan which would be put into effect if the need was to be felt, that is to say if markets do not understand the reality and the depth of the austerity plans."

"This is not a mechanism that is necessary today," she said.

"We indicated that the examination of the technical modalities is a work of anticipation but there is no reason to anticipate implementation. So I won't go into the technical details," she added.

Dutch Finance Minister Jan Kees De Jager said any help would be tied to tough conditions of the kind that the International Monetary Fund applies when rescuing countries in trouble.

"If we talk about measures, for example about loans, they will follow the same kind of methodology as the IMF," he said.

Germany, Europe's biggest economy and the country that would be the linchpin of any support, is reluctant to bail out Greece and above all rush into anything before Athens shows it is willing to take the painful steps needed to fix its finances.

Officially, the final decision on any aid for Greece would be for EU leaders if it came to that, Juncker said.