First ‘Euro rescue’ agreed
(4 May 2010 – Europe) Greece has become the first member of the 16-nation eurozone to agree to a financial rescue package.
The European Central Bank and the International Monetary Fund (IMF) cleared the way for the agreement after Finance ministers, meeting in Brussels, endorsed a draft deal which provides a €110billion ($159bn) bailout loan to Greece, of which €80bn would come from the eurozone member states and the rest from the IMF.
The deal has led to Greece embarking on a strict budget reduction plan with George Papandreou, the Greek Prime Minister, announcing budget cuts of €30bn for the next three years on top of reductions already agreed.
Greece currently holds an enormous budget deficit which last year constituted 13.6 per cent of GDP. The proposed budget cuts will rein this figure back to 2.6 per cent, below the 3 per cent EU limit, by 2014, two years later than originally promised.
Without this rescue package in place, it is widely thought that Greece would simply have become bankrupt. Andreas Papaconstantinou, the Greek Finance Minister, said: 'The choice is between collapse or salvation.'
It also became clear that the bailout was necessary to prevent panic spreading across Europe, ultimately destroying confidence in the euro, a key factor in determining support across the eurozone.
Despite approval from the finance ministers, eurozone leaders must also give it their formal approval, expected at a summit on Friday or Saturday. It is anticipated that, off the back of this final approval stage, emergency funding will be unlocked by the second half of next week.
The deal has led to Greece embarking on a strict budget reduction plan with George Papandreou, the Greek Prime Minister, announcing budget cuts of €30bn for the next three years on top of reductions already agreed.
Greece currently holds an enormous budget deficit which last year constituted 13.6 per cent of GDP. The proposed budget cuts will rein this figure back to 2.6 per cent, below the 3 per cent EU limit, by 2014, two years later than originally promised.
Without this rescue package in place, it is widely thought that Greece would simply have become bankrupt. Andreas Papaconstantinou, the Greek Finance Minister, said: 'The choice is between collapse or salvation.'
It also became clear that the bailout was necessary to prevent panic spreading across Europe, ultimately destroying confidence in the euro, a key factor in determining support across the eurozone.
Despite approval from the finance ministers, eurozone leaders must also give it their formal approval, expected at a summit on Friday or Saturday. It is anticipated that, off the back of this final approval stage, emergency funding will be unlocked by the second half of next week.
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