Saturday, 29 May 2010

Tracking eurozone crisis measures: Activating financial support for Greece

The moment of truth for Greece arrived. On 23 April 2010 the president of the Euro Group, the European Commission and the ECB took note of the request by the Greek government to activate the financial support mechanism, which was being prepared by the Commission, the ECB and the IMF (press release IP/10/446).

A few days later, amidst speculation on the markets, the president of the European Commission José Manuel Barroso made a statement on the progress being made on the programme (28 April 2010; MEMO/10/157). The following day came a calming statement from commissioner Olli Rehn regarding the work on the Greek programme to reverse the debt spiral and to restore competitiveness.

On 2 May 2010 the euro area member states and the IMF agreed with Greece on three year financial support programmes of up to € 110 billion, of which € 30 billion to be made available by the eurozone members in 2010.

Commissioner Olli Rehn and IMF managing director Dominique Strauss-Kahn recognised that the programme demands great sacrifice from the Greek people. A sustained, multi-year effort will be needed.

The statement by the Eurogroup gave the seal of approval by the eurozone member states, saying that

… euro area Ministers unanimously agreed today to activate stability support to Greece via bilateral loans centrally pooled by the European Commission under the conditions set out in their statement of 11 April. Parliamentary approval, needed in some Member States prior to the release of the first tranche, is expected to follow swiftly.

With regard to the formal decisions, the Euro Group had this to say:

The main elements of policy conditionality, as endorsed today, will be enshrined in a Council Decision under Articles 126 and 136 TFEU to be formally adopted in the coming days and further detailed in a Memorandum of Understanding, to be concluded between the Greek authorities and the Commission on behalf of euro area Member States.

The eurozone and the IMF had practically brought the Greek rescue package to a conclusion, preventing default on 19 May, and expressed their confidence in the measures adopted by the government of Greece, but later events showed that significant market operators were less optimistic and that negative sentiments were spreading towards the euro currency as a whole, and especially Spain and Portugal.

Ralf Grahn