Page last updated at 03:04 GMT, Friday, 26 March 2010

Deal reached over Greece debts at Brussels summit

Jose Manuel Barroso: "Where there is a will, there is a way, and it's the European way"

All 16 eurozone countries have backed a financing plan to help debt-laden Greece, which will include IMF money.

The safety net would total up to 22bn euros (£20bn), but would only be used if market lending to Greece dried up.

Eurozone nations would grant co-ordinated bilateral loans, totalling some two-thirds of the funding, French President Nicolas Sarkozy said.

The plan was worked out at a summit in Brussels. Greek PM George Papandreou called it "a very satisfactory" move.

The President of the European Council, Herman Van Rompuy, said the deal was significant "not just for Greece, but for the stability of the eurozone".

European Commission President Jose Manuel Barroso said he was "extremely happy that we've reached this deal", calling it "a right decision".

'Last resort'

The joint eurozone and International Monetary Fund bail-out programme envisages strict conditions and requires the unanimous agreement of the 16 eurozone nations to release loans.

Jonny Dymond
Jonny Dymond, BBC News, Brussels
There is no bail-out but a bail-out mechanism is in place; the 16 eurozone countries have agreed to it. All it needs now is the nod from the rest of the 27-member EU.

Late on Thursday night there was some alarm from Britain and others about a reference to "economic government" by the European Council.

That's been watered down to economic governance, something more anodyne and thus acceptable.

The involvement of the International Monetary Fund in any future bail-out is a rebuff to the French, but it was a condition of the Germans playing ball. German Chancellor Angela Merkel has got pretty much everything she wanted.

The agreement included no numbers, but officials in Brussels - speaking on condition of anonymity - said the total package would be some 22bn euros.

A draft of the plan, seen by the BBC, says the Greek government "has not requested any financial support", so "no decision has been taken to activate" the mechanism yet.

"We hope that it [the bailout mechanism] will not have to be activated," Mr Van Rompuy said late on Thursday, after the deal was agreed.

He added that the deal should tell markets to "have confidence that the eurozone will never abandon Greece".

The eurozone had previously avoided seeking an IMF loan for Greece, preferring a European solution and anxious to maintain global confidence in the euro.

Germany's Chancellor Angela Merkel has signalled reluctance to offer Greece anything resembling a bail-out, which is not allowed under the single currency rules.

Austerity drive

Greece has enacted unpopular measures to curb its deficit, including a freeze on public sector wages, pension reforms and increases in fuel taxes.

If Greece cannot borrow from markets the eurozone countries and IMF will provide loans totalling about 22bn euros (£20bn)
IMF will provide one-third of the loans, eurozone the rest
Mechanism is a "last resort" to bail out Greece
Decision to give loans will be based on assessment by European Commission and European Central Bank

It is also having to refinance its debt. Because of doubts over its ability to pay, it is having to pay interest at about 6% - around double what Germany has to pay.

Mrs Merkel said she would press for the EU to amend its treaties to strengthen its ability to prevent future budget crises.

Stressing the need to learn lessons from the crisis, she wants a treaty change to allow sanctions to come into force should a eurozone country ever default on its debts.

Mr Papandreou urged EU leaders to act to stabilise the euro. The single currency hit a 10-month low against the dollar on Wednesday after a credit downgrade for Portugal, which is also struggling with heavy debts.

Greece's woes have exposed fundamental disagreements about how the 11-year-old euro project should work, the BBC's Europe business reporter Nigel Cassidy says. The eurozone's governance will have to be re-examined, he adds.

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The commitment to help Greece could prevent the crisis sapping market confidence in the euro and ease fears of contagion in the eurozone.

EU members Hungary, Latvia and Romania have received emergency loans from the IMF and EU as their budgets have been hit hard by the global economic downturn. But, unlike Greece, they are not in the eurozone.

The Greek crisis is not formally on the agenda of the summit, which is officially concerned with the EU's 10-year economic strategy, and reinvigorating international negotiations over global warming.

German taxpayers are fiercely opposed to bailing out Greece, which is burdened by debt of nearly 300bn euros (£267bn, $407bn) and a public deficit of 12.7% of GDP - more than four times the official eurozone limit.

EU debt figures - graph

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