The EU Statement on Greece

Here is the text issued by the EU leaders:

We reaffirm that all euro area members must conduct sound national policies in line with the agreed rules and should be aware of their shared responsibility for the economic and financial stability in  the area.

We fully support the efforts of the Greek government and welcome the additional measures
announced on 3 March which are sufficient to safeguard the 2010 budgetary targets. We recognize  that the Greek authorities have taken ambitious and decisive action which should allow Greece to regain the full confidence of the markets.

The consolidation measures taken by Greece are an important contribution to enhancing fiscal
sustainability and market confidence. The Greek government has not requested any financial
support. Consequently, today no decision has been taken to activate the below mentioned
mechanism.

In this context, Euro area member states reaffirm their willingness to take determined and
coordinated action, if needed, to safeguard financial stability in the euro area as a whole, as decided the 11th of February.

As part of a package involving substantial International Monetary Fund financing and a majority of European financing, Euro area member states, are ready to contribute to coordinated bilateral loans.

This mechanism, complementing International Monetary Fund financing, has to be considered
ultima ratio, meaning in particular that market financing is insufficient. Any disbursement on the
bilateral loans would be decided by the euro area member states by unanimity subject to strong
conditionality and based on an assessment by the European Commission and the European Central Bank. We expect Euro-Member states to participate on the basis of their respective ECB capital key.

The objective of this mechanism will not be to provide financing at average euro area interest rates, but to set incentives to return to market financing as soon as possible by risk adequate pricing.  Interest rates will be non-concessional, i.e. not contain any subsidy element. Decisions under this mechanism will be taken in full consistency with the Treaty framework and national laws.

11 thoughts on “The EU Statement on Greece”

  1. The requirement for unanimity, further ratification and individual contributions without any binding commitments from member countries is a classic EU fudge. This shows the usual weaknesses up, albeit in more dramatic circumstances. The concession that the IMF may become involved is welcome as it removes some of the uncertainty. A good day for the EU economy? It’s too early to say. (I know, I know 🙂 )

    Any disbursement on the bilateral loans would be decided by the euro area member states by unanimity subject to strong conditionality and based on an assessment by the European Commission and the European Central Bank. We expect Euro-Member states to participate on the basis of their respective ECB capital key.

  2. Some assignments for you
    – What’s the trigger for the plan to be implemented? At what level of usury can Greece call on the funds?
    – Can other countries benefit from the liquidity mechanism at the same time? Would other governments like to benefit at the same time as Greece would? Would a government NOT be able to, given that it has a blocking vote?
    – Is the “gun loaded”, to use Mr Papaconstantinou’s favourite phrase? How will it be loaded? i.e. Will the other eurozone states raise cash in advance of a call on the liquidity mechanism?
    – Does the IMF now get a look-in on how policy in Greece is formulated and implemented? Will it have any teeth under this plan?
    – What has changed for Greece? Will the Greek government show leadership and get its public to buckle down – and stop incriminating finance and “xenoi”?
    – What has changed for markets? Are Greece austerity measures any more credible, any closer to effective implementation?
    – Will Greece finally come back to the markets? EU states were put under pressure. Will all be forgotten?

  3. Only 23 billion Euro to bail out an entire country with a climate to die for, the Parthenon, lovely views, countless paradisiacal islands, relaxing background music, and we are throwing twice that at the event horizon known as Anglo Irish bank, that doesn’t even have an ATM let alone a branch network.

  4. It all sounds like a fudge to me. The fund will only be used in extreme emergency and everybody has to agree. If there is an extreme emergency it means Greece is failing to get its house in order (quite likely in my opinion) but then why would you throw money at them. This is just another move on the chess board.

  5. @Philip – you beat me on posting this. I had been watching it over the last few days.

    There does not seem to be that much comfort for Greece in this deal – yes they won’t be let default but the price will still be high.

    I suppose this goes down as a victory for Merkel, who has already been compared to the ‘Iron Lady’ in Germany – probably an image she likes. It also seems that she managed to find some allies, but it will be interesting to see what the implications of this decision are on the EU. It certainly seems to me that solidarity has changed to conditional solidarity. German television broadcast a rather remarkable interview with the Green MEP Daniel Cohn-Bendit (German born but representing France he was known during the 68 student movement as Danny the Red). Cohn-Bendit said he was dreaming about a return of Helmut Kohl who would take Angela Merkel by the hand to steer her in the right direction!

  6. @Stuart Blythman – “This is just another move on the chess board.”

    I have been likening it to a game of cards and said a week or two ago that the Greek PM had now played his best hand (threat of the IMF). Looks like he got called with this deal.

    That Doktor Merkel is a canny player. I would not like to play poker against her.

  7. If only our problems here were as easy to solve as Greece’s .. the cat is finally out of the bag at Anglo .. They lost 124,000 golf balls

    http://www.irishtimes.com/newspaper/finance/2010/0326/1224267097237.html

    “An examination by Anglo’s new management team of past spending at the bank found that €208,000 was spent on golf balls and €218,000 on golf umbrellas over a three-year period. However, the new team have found just 1,000 golf balls left out of about 125,000 bought over that time.”

  8. @All

    Been following this from the start – looks like 2/3 EZ & 1/3 IMF.

    At least a decision, which is good. The German election in May influenced the 1/3 IMF – political economy. The ‘solidarity bond’ holding – but a little weaker.

    @Edgar

    Danny the Red dreaming of Kohl! Sure Niklas not too impressed – what’s Danny smokin these days? The Blue Pill? (-;

  9. @Joseph:
    “That sounds like the blind leading the blind?”

    I thought our problem was that we were dumb rather than blind.

    bjg

  10. Fiat currency. It always offers the option to devalue. Pity those who have borrowed from outside the EZ.

    There is a race to devalue with the GBP and the US$. Why stop the “Greek crisis” now? Have we reached the correct level? When we need to resume, who will suffer the next crisis? Bets, anyone? Maybe Ireland should play up a crisis, in due turn of course. Shouldn’t be too hard after all.

    What is the correct rate vs the US$? Does the GBP matter? Do commodity prices enter into this? Will the Chinese have to revalue as the US$ plummets?

    Boy, what news we are going to get over the next years.

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