EU agrees €30bn loan for Greece

EUROPEAN governments have put together a €30 billion loan package for Greece, trying to stamp out its fiscal crisis and restore confidence in the euro.

Ireland has signed up for this deal and the cost to the state could be about €450m.

Finance Minister Brian Lenihan said last night that “Ireland’s participation would require national legislation,” to facilitate the transfer of funds from the state’s coffers.

Forced into action by a surge in Greek borrowing costs to an 11-year high, finance ministers from the 16 euro countries said they and the International Monetary Fund would offer the loans at non-subsidised interest rates in case Greece runs out of money-raising options.

European Union Economic and Monetary Affairs Commissioner Olli Rehn said the cost of the loans would be around 5%.

“We are now operational if the mechanism has to be activated,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels yesterday. “The initiative for activating the mechanism rests with the Greek government.”

With the euro facing the sternest test since its debut in 1999, the bloc manoeuvred around rules barring the bailout of debt-stricken countries, aiming to prevent Greece’s financial plight from spreading and to mute concerns about the currency.

Germany is prepared to give Greece loans at below-market interest rates, dropping its opposition to subsidies, as European finance ministers discussed the terms of a lifeline for the debt-stricken nation. The loans would be priced above the rate charged by the International Monetary Fund, which would also participate in a EU-led rescue.

Such an arrangement would satisfy German demands that Greece shouldn’t be given subsidised loans, a source said.

German resistance to subsidised loans threatened to hold up efforts to agree a rescue package for Greece, whose bonds plunged last week.

Finance Minister Brian Lenihan took part in yesterday’s eurogroup talks on the Greek situation, by teleconference.

Mr Lenihan said yesterday: “The agreement is first and foremost about safeguarding financial stability in the euro area. This will be to the benefit of all member states including Ireland.”