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Europe

Eurozone leaders formally approve Greek aid package

Video by Carla WESTERHEIDE

Text by News Wires

Latest update : 2010-05-08

Eurozone leaders have formally given their backing to a massive aid package for Greece, hoping that their show of political resolve will prevent Athens' debt crisis from spreading to other European countries.

Greek bailout breakdown

Eurozone governments are to provide Greece with 80 billion euros in three-year loans, while the International Monetary Fund will provide another 30 billion. Below is an overview of how much donors will contribute:

Germany - €22.33 billion.
France – €16.77 billion
Italy - €14.74 billion
Spain - €9.79 billion
Netherlands - €4.7 billions
Belgium - €2.86 billion
Austria - €2.29 billion
Portugal - €2.06 billion
Finland - €1.48 billion
Ireland - €1.31 billion
Slovakia - €820 million
Slovania - €390 million
Luxembourg - €210 million
Cyprus - €160 million
Malta - €70 million
 

REUTERS - Euro zone leaders approved emergency loans for Greece on Friday and governments around the world tried to calm markets shaken by fears Athens’ debt crisis could cause turmoil in other European economies.

“It’s done,” a European Union source said, confirming the leaders of the 16-country single currency group had given their political stamp of approval to an EU-IMF deal to release 110 billion euros ($147 billion) to Greece over three years.

Group of Seven finance ministers discussed the crisis in a conference call after U.S. Federal Reserve officials expressed concern and President Barack Obama told German Chancellor Angela Merkel by telephone that he backed efforts to rescue Greece.

World stocks held near a three-month low, despite strong U.S. jobs data, because of fears that the emergency loans might not be enough to prevent a Greek default.

“We agreed on the importance of a strong policy response by the affected countries and a strong financial response from the international community,” Obama said.

He said regulatory agencies were investigating a sudden drop on U.S. markets on Thursday, which he called “unusual market activity”, and would recommend appropriate action. The G7 ministers also agreed to keep a close eye on the markets.

Obama and Merkel spoke before the summit in Brussels at which the euro zone also discussed ways to prevent such crises in the future and to stop any other countries suffering similar problems in the euro zone.

“First, we must speed up the regulation of the financial markets. Time is running out, this has to happen quickly,” Merkel told reporters in Brussels at a meeting attended by European Central Bank President Jean-Claude Trichet.

Merkel, who presides over Europe’s largest economy, said she would not rule out reform of treaties to ensure budget rules are toughened. Other EU leaders have resisted such changes and the 27-country bloc has struggled for unity during the crisis.

Systemic problem

EU officials said the euro zone leaders were discussing a declaration in which they would demonstrate solidarity with Greece, call for stronger budget discipline and try to show markets they were in control of the situation.

“This is a systemic problem. It’s a question of the stability of the euro,” one EU official quoted Trichet as saying during the meeting, adding that he had called for more efforts to cut budget deficits.

Hours before the meeting, the German parliament approved its share of the Greek rescue, the largest contribution by a euro zone country. The Dutch parliament also approved its part of the deal and Italy’s cabinet has given initial approval.

But five German academics filed a legal challenge to the package, reflecting widespread German public opposition to the measure.

Philadelphia Federal Reserve Bank President Charles Plosser said the crisis did not pose a huge risk to the United States, but this did not mean it could not evolve into one.

« The challenges that Greece poses are at the moment primarily for Europe more broadly ... that can spill over to us in the form of a weaker market for our exports, » he said.

« The more direct danger is of course concerns about the financial markets and how they will behave. »

Pamela Cox, the World Bank’s vice president for Latin America, said the region not was in danger of direct fallout from Greece and the euro zone’s debt crisis. « But if there is a global contagion, Latin America will be affected, » she said.

 

Market volatility

Dismissing suggestions the euro zone was about to break up, European Central Bank Governing Council member Guy Quaden told a Belgian newspaper: « Portugal, Spain, Ireland or Italy are not in the same situation as Greece. »

Euribor bank-to-bank lending rates had earlier reached their highest level in almost four months and the euro traded close to a one-year trough.

The market volatility could prompt China to move more slowly than expected to let the yuan appreciate, foreign exchange strategists said.

Greece’s parliament backed an austerity plan on Thursday but selling accelerated across markets after the ECB said it had not considered buying government bonds to ease Greece’s debt crisis.

European investment-grade corporate credit default swaps hit their widest levels in more than a year, and there was a rise in the premium that investors demand to buy peripheral euro government bonds rather than those issued by Germany.

Greece’s 30 billion euro ($40 billion) austerity bill imposes years of hard measures in return for the joint rescue by the EU and IMF, and has led to violent protests in Athens.

Greek Prime Minister George Papandreou tried to ease any concern over his country’s commitment to the austerity measures when he arrived for the euro zone meeting in Brussels.

« The Greek people have endured the strain of the economic crisis during the last few months, yet both the government and the Greek people are absolutely determined to change the path for Greece to one of stability and growth,” he said.


Date created : 2010-05-08

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