Details of Greek loan package yet to be agreed

WORK will continue this week on the details of an emergency loan package for Greece from eurozone countries – but all, including Ireland, will be working to ensure that they never have to pay out money.

Greek finance minister, George Papaconstantinou described the proposed plan as a “loaded gun” to raise funds without necessarily having to be used.

“We would like to have a loaded gun on the table and hope never to have to use it,” Papaconstantinou told reporters in Brussels.

“It’s clear that the terms of refinancing the Greek debt improve as the markets and European partners see the determination of the Greek government.”

Designed chiefly to protect the euro, the details are being hotly contested, and finance ministers yesterday returned it to the experts to argue over basic elements of the plan.

The one concrete element of the so-called aid mechanism the ministers agreed on is that it will not involve loan guarantees but that it will the form of bilateral loans from all the euro area countries.

But the questions of the amount of money, who pays in what proportion, the rate of interest, the duration of the loan and what would trigger it have all yet to be agreed. The contribution from each country – considering that 13 of the 16 eurozone members are in breach of the debt and budget rules – will be hotly contested.

“It may not mean that all countries contribute equally,” an EU source said. It is expected that the main contributors would be Germany and France.

Because the details are so hazy, the ministers did not even give the plan political agreement and it’s now expected that this will be left to the EU leaders at their summit next week.

Greece needs to borrow €54 billion this year and about half of this in April and May. The current yield on bonds they sell to raise money on international markets is very high at 6%. They hope that an emergency package together with the evidence that they are tackling their out of control economy will calm markets and reduce the cost of borrowing.

Ratings agency Standard & Poor’s took Greece off the country credit watch for a possible downgrade yesterday, attributing their decision to the new cuts in spending made at the urgings of the EU.

In the meantime, ministers put off agreeing stiff new rules on hedge funds and private-equity firms, saying more time was needed to reach a deal.

A number of countries, including Ireland but especially Britain, are contesting the scope of the rules.

Internal Market commissioner Michel Barnier kept up pressure for rules on hedge funds and private equity yesterday, saying on some days they accounted for half the transactions on the market. “They pose a potential systemic risk and that is undeniable”.

The Spanish presidency has said it intends to have legislation agreed by the end of its term in July but progress is unlikely before the British general election in May.