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Europe
Greece rescue debate under way
Eurozone finance ministers discuss standby measures to support debt-stricken nation.
Last Modified: 15 Mar 2010 20:35 GMT
Greece has witnessed huge strikes over the government's austerity measures [AFP]

Eurozone finance ministers have begun discussing the mechanics of a financial rescue for Greece during a summit in Brussels.

However, they gave few details on Monday of their standby planning as Athens tries to fix its public finances alone.

The rescue would be the first for the monetary union, created in 1999, and the Greek government has been pressing European capitals to go beyond a vague political pledge of support for the debt-stricken country.

"We will discuss several options ... to find a solution if one is needed," Jean-Claude Juncker, the prime minister of Luxembourg, said.

He is chairing the talks in the Belgian capital.

Tough conditions

Jan Kees de Jager, the Dutch finance minister, said many countries would be involved if it came to it, but any help would be tied to tough conditions of the kind that the International Monetary Fund applies when rescuing countries that are in trouble.

"If we talk about measures, for example about loans, they will follow the same kind of methodology as the IMF," de Jager said. "This is not a bailout."

Alan Fisher, Al Jazeera's correspondent in Brussels, said: "What we're likely to see is essentially a safety net being constructed under the Greeks.

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"About $27bn is due to be repaid by Greece in April and May. Now, to realise that money [the Greeks] are going to have to go to the markets, to sell their debt, and someone's going to have to buy it.

"What could be on offer here ... is that central banks ... around Europe may say we will give you a loan, we can guarantee you a loan, and governments will guarantee loans as well as saying if they [the Greeks] default we will meet that."

The European commission, the European Union's executive body, has said it is ready to propose a framework that could be used to help Greece, despite signs of reluctance from France and Germany to announce concrete commitments.

Olli Rehn, the European monetary affairs commissioner, said the commission was ready to put proposals to ministers now that Athens had come up with an ambitious austerity plan to cut its deficit.

"We will also discuss how to safeguard financial stability in the euro area as a whole," he said.

"The commission is ready to table a proposal for a European framework for co-ordinated and conditional assistance."

Structural adjustments

Greece recently announced an additional $6.5bn in savings through public sector salary cuts, pension freezes and consumer tax increases to deal with its growing deficit.

The latest cutbacks, added to a previous $15.24bn of austerity measures, seek to reduce the country's budget deficit from 12.7 per cent of annual output to 8.7 per cent this year.

Praising Greece's austerity moves on Monday, Angel Gurria, secretary-general of the Organisation for Security and Co-operation in Europe, said: "Greece deserves to be supported given the package and the policy measures that it has announced."

He said support should take the form of "something markets will understand and something which will allow Greece to reduce the cost of its borrowing".

German stand

Germany, Europe's biggest economy and the country that would be the linchpin of any support, is reluctant to bail out Greece.

It says Athens' priority must be to get its finances in order and make deep structural adjustments to rein in spending.

"No political decisions will be made," a German government spokesman said of Monday's meeting.

Those comments played down talk at the weekend that a detailed plan could be close.

The German spokesman reiterated that Greece had not asked for support and was working to resolve its problems by itself.

Euro weakened

Meanwhile, the euro lost some ground versus the US dollar on Monday, hampered by what some analysts saw as a lack of progress on the financial aid package for Greece.

The currency traded down 0.8 per cent on the day at $1.3658 and down from Friday's four-week high close to $1.3800.

Jean-Claude Trichet, the European central bank president, who is also attending the Brussels talks, said the currency was in safe hands.

"The euro is certainly not in danger," he said.

Source:
Al Jazeera and agencies
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