European ministers stressed yesterday that a contingency plan for saving Greece from bankruptcy with emergency loans was “simply prudent planning and was unlikely to be enacted.”
As the eurozone tackled a government debt crisis that has exposed deep divisions, European Union ministers made it clear that the Union sees the mechanism as a “necessary evil that must be prepared only if the health of the euro currency is endangered.”
The 27 ministers echoed their eurozone counterparts by backing the measures Athens has already undertaken to curb spending and raise taxes.
The onus will therefore remain firmly on Greece to maintain a tight watch on national budget surgery.
They “endorsed the European Commission’s assessment of Greece’s fiscal situation,” which held that Greece is “on track” to deliver on its promises, said EU Economic and Monetary Affairs Commissioner Olli Rehn after the talks ended.
Spanish Finance Minister Elena Salgado, chairing the talks, said of the contingency plan that “we are absolutely not at the stage where we are imagining (its) use.”
German Deputy Finance Minister Joerg Asmussen said the eurozone “did not take a decision on concrete aid” on Monday night and “does not anticipate a decision at the EU summit” next week either.
Greece has complained that the yield on bonds it sells in order to raise money on international markets is too high at above six per cent. But eurozone ministers intimated any EU aid would also come at a heavy price.
Welcoming the “serious headway” made in drawing up the contingency plan, which reflects a step-change in moves to give the EU a greater say in pan-national economic governance, the Greek finance minister said he expected the bond yields Athens has to offer would now fall.
“It is clear we are not happy paying the kind of markups and spreads we are paying at the moment,” said George Papaconstantinou.
However, he said borrowing costs had fallen to a rate of 6.3 per cent on the last bond issuance earlier this month and that “the market is reacting positively to the measures we are taking.”
“It is a question of time,” he said, predicting that the rates “will go down.”
If money is ever released, it will be by all 15 of Greece’s partners in the euro currency area and only if ordered by leaders of the 27 EU nations.
Eurozone finance ministers said the objective of safeguarding financial stability in the euro area as a whole would mean “strong incentives to return to markets as soon as possible,” or high rates.
Groaning under 300 billion euros (410 billion dollars) of debt, Greece is looking to raise 54 billion euros this year just to finance the debt but is struggling to do so without paying premium interest rates.
