EU denies Greece bailout deal

 

The euro zone has not agreed a deal on financial support for heavily indebted Greece, but technical work is continuing and the Commission stands ready to act if need be, a spokesman said today.

Asked whether the 16 euro zone members had reached a deal on financial support for Greece, European Commission spokesman Jonathan Todd said: "The Commission stands ready to act if necessary. Technical work is ongoing and has not yet been concluded.

All the rest is speculation." Britain's Guardian newspaper on Saturday quoted an unnamed senior European Commission official saying euro zone members had agreed on "coordinated bilateral contributions" in the form of loans or loan guarantees if Greece asks the EU for help.

In its report, the Guardian claimed the 16 euro zone members had agreed on "co-ordinated bilateral contributions" in the form of loans or loan guarantees to Greece if Athens is unable to refinance its debts and asks the European Union for help.

The agreement was reached despite strong resistance by Germany, and Berlin has played the pivotal role in organising the deal, the paper quoted other sources as saying.

Euro zone finance ministers will finalise the package on Monday, the paper said.

The aid to be made available by the bailout could reach €25 billion, the paper quoted its sources as saying. Greece's borrowing needs for the whole of 2010 total €53.2 billion.

Greece, labouring under a crippling debt burden, announced a €4.8 billion package of austerity measures last week designed to reduce its budget deficit to 8.7 per cent of GDP this year from 12.7 per cent in 2009.

It has been paying a high premium over benchmark European bonds to raise funds, the yield spread of 10-year Greek government paper over bunds topping 400 basis points in January.

The bailout "will be a coordinated approach of bilateral contributions . . . a bilateral contribution can be a loan or a loan guarantee. The guarantees will facilitate the kind of funds potentially needed in this context," the paper quoted the senior commission official as saying.

The agreement has been tailored to avoid breaking the ban, in the rules governing the operation of the euro currency, on a bailout for a country on the brink of bankruptcy, and to avoid a challenge by Germany's supreme court, the official addded.

Reuters