EU bailout to give Greece 'breathing space'

A European bail-out deal for Greece will give the country a "breathing space" to escape from its spiral of debt, European Monetary Affairs Commissioner Olli Rehn said today.

He said the deal would be concluded within days, to restore stability not just to the Greek economy but to the single currency itself.

"In the past 10 days, the experts of the Commission, the European Central Bank and the International Monetary Fund have worked extremely effectively and hard with the Greek government to work out a programme that will reverse the debt spiral of Greece and restore its overall economic competitiveness," Mr Rehn told a press conference in Brussels.

"I am confident that the talks will be concluded in the next days.

The outcome will be a multi-annual programme that will lead to major fiscal and also structural adjustment.

"Funding to Greece through the coordinated bilateral loans by the euro-area member states will be conditional on Greece implementing the decisions required to meet the conditions of fiscal consolidation and structural reforms."

The Commissioner went on: "The financial support will give Greece a sufficient breathing space from the pressures of the financial markets to decisively restore the sustainability of its public finances and to put the economy back on a path of sustainable growth."

He said the bail-out "exercise" was not being conducted just because of the situation in Greece, "but all euro-area member states and their citizens to safeguard financial stability in Europe and globally, which is absolutely crucial for our economic recovery, steady growth and employment."

The latest bid to talk up the euro came as German chancellor Angela Merkel was still considering whether or not to give her approval to the planned bail-out deal, worth €45bn, of which Germany would loan the largest individual amount of roughly €8.5bn.

She is demanding tough new measures from the Greek government to cut spending and raise taxes - but Athens is already facing a growing public backlash over the austerity measures it has introduced so far in a bid to slash its deficit and revive faith in its economy and the euro.