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| EURO-SUPPORT FOR GREECE 26/03/2010 |
| (2010-03-26) |
| Last updated: 2010-03-29 13:19 EET |
The plan will be funded by Euro-zone countries and the IMF. If put to use, this mechanism will be a first since the launch of the Euro, 11 years ago. After weeks of rifts between European states, regarding the opportunity of the aid for Greece and ways to provide potential financial backing, France and Germany broke the deadlock when French president Nicolas Sarkozy and German chancellor Angela Merkel met on Wednesday.
The aid mechanism provides for the existence of a loan package that Greece will be able to use as a last-resort tool, if it fails to contract loans with reasonable interests on the financial market, to fund its deficit. Two thirds of the plan will come from loans from Greece’s Euro zone partners and a third will be supplied by the IMF. This is the first time the IMF has intervened for a Euro zone state. A defined sum has not been allocated to help Greece, but the country’s potential needs are assessed between 20 and 30 billion euros.
European leaders were bound to reach an agreement, given that their divergences have already sent the Euro exchange rate plummeting. The Euro has seen a strong depreciation this year, as compared to most of the world’s currencies and is now struggling to settle at 1.33 per dollar, as against 1.46 to 1.48 per dollar, late last year. During talks prior to the Brussels summit, some countries approved of the IMF’s intervention, while others opposed it, arguing that the move translated as a failure of the Euro zone.
The main opponent was Germany, the strongest economy in the EU. In order to make a concession, at the summit, Berlin was promised the commitment of a stronger budget monitoring of EU states, followed by severe sanctions for states which fail to observe EU norms in the field. For financial analysts, the situation in Greece has the force of a tsunami wreaking havoc across all EU states. Romania could also feel the effects of the Greek crisis, although experts claim Bucharest should not panic. Romania’s public debt is very low and in January this year, it dropped by about 1 billion euros as compared to December 2009.
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