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Eurozone Lays Basis For Financial Lifeline To Greece


Riot police stand guard next to a Molotov cocktail thrown by protesters outside the Greek parliament building during a demonstration in Athens on March 11.

Riot police stand guard next to a Molotov cocktail thrown by protesters outside the Greek parliament building during a demonstration in Athens on March 11.

(RFE/RL) -- After many weeks of vague verbal pledges to stand by Greece in its financial crisis, finance ministers of the countries sharing the common euro currency have come up with a plan to prevent Athens from defaulting on its massive debt repayments.

The 16 ministers met in Brussels late on March 15 and agreed the framework of a deal. Few details have been released, but sources say it involves EU governments -- either bilaterally or severally -- making available loans to Greece at higher-than-usual rates of interest. The loans would not be guaranteed.

As these would count as commercial transactions, they would not breach EU rules against member states taking over the debt burden of other member states.

The Bloomberg economic news service quoted Dutch Finance Minister Jan Kees de Jager as emphasizing the commercial motivation of the package. He said Athens must be prepared to pay more than standard interest rates for these loans, so that there will be "an incentive for Greece to refinance through the markets."

Senior EU ministers are at great pains to point out that they do not believe Greece will default, and they emphasize that the measures they have drawn up are only contingent.

Luxembourg's Jean-Claude Juncker said Greece will be supported, but not at any price.
"The message to the market is not that Greece will be supported in any case. Greece would be supported if this would be needed," said Luxembourg Prime Minister (and Finance Minister) Jean-Claude Juncker, the head of the eurogroup of eurozone finance ministers. "We don't think that this will be needed, but we have to take a decision on the instruments."

Protecting The Euro

The French and German finance ministers are taking a similar line that a rescue operation will not be necessary. Greece has introduced severe domestic austerity measures, and the standard EU line is that these will be sufficient for Athens to pull through the crisis on its own.

Behind this insistence lies the main concern of EU leaders -- namely, that a Greek default would cause a severe lack of confidence in the euro, and could spread investor panic to Spain, Portugal, and other heavily indebted EU members.

The common currency has lost 10 percent of its value against the dollar since last November.

A statement from the eurogroup ministers makes clear their preoccupation with the euro, not with Greece, which is largely blamed for mismanaging its own economy. The statement says the objective is "to safeguard financial stability of the euro as a whole."

The rescue plan must now go to the 27 EU leaders for endorsement. But officials say it might not be ready for submission to the EU summit set for Brussels on March 25 and 26, and may have to be approved later.

with agency material
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