A European Union financial safety net for Greece approved late Thursday contains potential bilateral loans from eurozone countries and assistance from the International Monetary Fund.
“Germany in particular was one country that favored the IMF helping out, whereas a lot of the other eurozone members felt like this was a way for the eurozone to prove that it was able to keep its own house in order, so it was much less keen for the IMF to be involved and more interested in bilateral loans from fellow eurozone members,” says Brian Beary, Washington correspondent for the EU affairs publication Europolitics.
The resulting financial mechanism involved two-thirds of bilateral loans from other European countries and one-third from the IMF, says Beary. But, he notes, no loans have been approved, just a mechanism that has received the green light as long as Greece and 15 other European countries accept it.
“The mechanism would only be triggered if Greece asked for it to be triggered, and Greece has specifically said it does not want this to happen,” he adds.
Hear the rest of Beary’s description of Greece’s financial straits here:
The rescue plan brings down the cost of insuring Greek debt against default and paves the way for it to issue bonds as early as next week.
“The [EU] agreement is a very solid development as it eliminates the default risk and the refinancing risk and definitely raises the credibility of the government’s austerity package,” said Petros Christodolou, chief of the Greek Public Debt Management Agency, according to the Wall Street Journal.
The Financial Times reported that Greece is expected to issue either a three-year or seven-year multi-billion-euro bond next week, followed by another in April, to raise money to refinance its debt.