THE 16 euro countries and the International Monetary Fund have agreed to release €110 billion in “unprecedented” rescue loans to Greece, €1.3 billion of which will come from Ireland.
Having agreed a fortnight ago to provide up to €45 billion to Athens in the first year of the rescue, the European and IMF authorities responded last night to market pressure to set out for the first time the overall value of the emergency package.
The deal to activate the rescue, struck at an extraordinary meeting of euro zone finance ministers, came as Greece agreed to intensify efforts in the next four years to bring its budget deficit under control. Taxes will rise, public sector pay will be cut and pension age will also be increased under the plan.
The pact follows months of pressure on Greek borrowing costs and mounting fear of financial market contagion bringing fiscally weak countries such as Spain, Portugal and Ireland under pressure.
While German chancellor Angela Merkel had played for time during key talks in the last 10 days, she changed stance in the middle of last week to call for a swift agreement.
Although most Germans are opposed to the rescue and Dr Merkel faces a difficult regional election next Sunday, she has characterised the plan as an effort to secure stability in the euro area. Berlin will introduce legislation today to facilitate its participation in the rescue.
Minister for Finance Brian Lenihan, who did not attend the meeting, said last night that Ireland stood ready to play its part, adding that the Government was preparing legislation to release bilateral loans to Athens. “Today’s decision will help safeguard the stability of the euro area as a whole and this stability will benefit all euro zone member states,” the Minister said.
In a joint statement, EU economics commissioner Olli Rehn and IMF managing director Dominique Strauss Kahn said “difficult” fiscal steps taken by the Greek government were necessary to restore confidence in its economy and a better future for its people.
“The programme is unprecedented in the scope of the national effort required, as well as in the scale of the financial support – €110 billion – being provided by euro area countries and IMF. We are confident that Greece will rise to the challenge and succeed,” said Mr Rehn and Mr Strauss Kahn.
European Council president Herman Van Rompuy said after the ministerial meeting that he has called the leaders of the euro countries to a special summit on Greece next Friday “to conclude the whole process”.
But the euro group head, Jean-Claude Juncker, said the summit would not review the decision to activate the rescue. “If you think the European Council is going to take a different decision to ours, then you’re mistaken,” he said.
Loans will be available to Athens before the May 19th deadline it faces to repay an €8.5 billion bond, Mr Juncker added.
While Greek medium-term borrowing costs rose above 11 per cent per annum last week, the euro zone loans will be priced around 5 per cent.
As the deal was made public last evening, a bomb exploded in Athens outside a branch of the HSBC bank. While police said there were no injuries, Greek finance minister George Papaconstantinou acknowledged the further street protests are inevitable.
