4th Feb 2023

All eurozone states to contribute to Greek bail-out

  • Even struggling eurozone states have indicated their willingness to contribute to a Greek aid package (Photo: pimousse3000)

All eurozone states have signalled their willingness to contribute to a potential Greek bail-out, with the region's leaders hammering out an agreement late on Thursday night (25 March).

The exact details of how Athens would successfully trigger the new mechanism remain to be ironed out however, with any application for funds from the joint eurozone-IMF pot requiring unanimous euro member approval "based on an assessment by the European Commission and the European Central Bank."

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"You look at the situation and you make a judgement on the financial instability," said ECB president Jean-Claude Tricket after the agreement was struck, refusing to be drawn on whether a threshold bond yield would be used.

Mr Trichet indicated that ECB officials had already been in discussion with counterparts from IMF, having earlier voiced concerns that a role for the Washington-based organisation could jeopardise the independence of the eurozone's central bank. However the European monetary chief said he was now happy that "no one is putting this independence into question."

European Council President Herman Van Rompuy indicated that any aid for Greece would come from both funding partners at the same time, and not one after the other. "Greece, when they feel the need to make an appeal on the mechanism, they introduce their request immediately for a joint mechanism," he told journalists after the meeting.

All sides stressed their belief that the eurozone agreement would be sufficient in reducing Greece's borrowing costs however, without the need for Athens to call on financial support.

Market doubts in recent months over the Greek administration's ability to meet upcoming debt obligations have sent the country's borrowing costs spiralling upwards. Leaders also said they did not expect Portugal to encounter similar difficulties to those experienced by by Greece, despite a recent credit rating downgrade.

"On Portugal, the problem really is quite different," said Mr Van Rompuy. "The statistical fraud very much called into question the credibility of any measures or initiatives taken in Greece."

Economic governance

A final section in the eurozone leaders' declaration calls for greater economic co-ordination between member states, in order to prevent a similar crisis taken place in the future.

Mr Van Rompuy has been asked to establish a task force, "in co-operation with the Commission", to draw up measures by the end of the year on how to achieve this aim.

French President Nicolas Sarkozy rejected the idea that sanctions could be involved.

"We need to reconsider co-ordination of fiscal policies in order to avoid crises," he said. "I don't want to prejudge any of the working party's conclusions, but financial sanctions are a rather odd idea."

European Commission President Jose Manuel Barroso denied that Mr Van Rompuy's central role amounted to a reduction in commission powers.

"For a long time the commission has been asking the European Council to take on a more important role," he said.

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