Eurozone OKs EUR 8 B Loan for Greece, Staves off DefaultBulgaria in EU | November 30, 2011, Wednesday // 07:39| views
The Euro sculpture is seen in front of the European Central Bank (ECB) headquarters in Frankfurt, Germany. Photo by EPA/BGNES
After several months of tough negotiations, finance ministers from the 17 countries that use the euro approved late on Tuesday to release their portion of an EUR 8 B euro loan to Greece and stave off a Greek default.
The news was broken by Jean-Claude Juncker, who heads the eurozone finance ministers, after six hours of meetings.
The International Monetary Fund (IMF) is expected to sign off on its share — roughly one-third — early next month.
Troubled Greece will receive the loans by the middle of December.
The loan tranche was approved in principle at the end of the term of Papandreou government, which was forced to resign after the preposterous idea of the then prime minister to hold a referendum on eurozone membership.
Greece is now governed by a coalition government presided by technocrat Loukas Papademos, who was until recently vice governor of the European Central Bank, supported by the country’s two major political parties, Pasok and New Democracy.
The final nod of approval for the loan came after the major political parties, supporting the current cabinet, vowed in writing to implement the austerity reforms, to which Papandreou government had committed.
The ministers also agreed on rules to increase the firepower of their bailout fund, the European Financial Stability Facility, and will be able to offer insurance to those buying the bonds of nations like Spain and Italy.
In these cases, insurance certificates — attached to make bonds more attractive — will themselves be tradable, said Klaus Regling, who heads the bailout fund. The fund will also seek investment from sovereign wealth funds and other non-European sources.
Though a target of EUR 1 trillion was set for the expanded bailout fund, ministers acknowledged that this was now unlikely.
"This figure will be very difficult to reach, in view of the changed market circumstances." Luc Frieden, Luxembourg's finance minister, said.
After the discussions late Tuesday, Olli Rehn, European commissioner for economic and monetary affairs, said there would have to be tougher measures if Italy was to reach its financial targets.
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