Eurozone/IMF loan details to Greece to be discussed next week

THE details of a eurozone/IMF loan for Greece will be worked out next week when the European Commission sends a delegation to Athens at the request of the government.

As the cost to Greece of borrowing on the open market dramatically rose yesterday following a drop earlier in the week, the Greek Finance Minister, George Papaconstantinou requested discussions on the loan.

Eurozone finance ministers agreed last Sunday that they would put together a €30 billion loan between them for the stricken state with a further €10 to €15 billion to come from the International Monetary Fund.

The three year loan from the 15 eurozone countries would have an interest rate of about 5%, higher than that charged by the IMF. It was still not clear what rate the IMF would charge.

Following the decision the cost of borrowing dropped for Greece when they went to the markets to borrow €1.2 billion on Tuesday. But market confidence quickly ebbed, spreads widened again and the euro dropped for the first time in six days against the dollar and yen.

Ireland, that pledged about €460 million, has yet to pass legislation in the Dáil for the loan as have Germany and France, while the Dutch care-taker government believes it will get approval for it’s share of the loan.

Germany, the most reluctant of the eurozone states to aid Greece, will contribute the lion’s share of more than €8 billion. Two professors, who challenged and won important rulings on Germany’s participation in the euro in the past, announced they were returning to the country’s constitutional court to stop the loan.

The country has insisted that the multilateral loans do not constitute an EU bail-out and so does not breach German law. They also insisted that the IMF must be involved despite reluctance by other member states of having an organisation dominated by the US and its dollar have a say in the euro, the world’s second largest currency.