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The Euro zone and the International monetary fund will lend money to Greece only if the worst comes to the worst

26 March 2010 / 13:03:14  GRReporter
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Germany and France reached to a political decision regarding the financial support for Greece during the meeting of the European council in Brussels. The countries from the euro zone decide that only at a pinch they will give a chance to the Mediterranean country to borrow some money, however at very strict conditions. The money will be granted according to the principles of the financial markets with interest up to date for the respective period without providing any more favorable conditions for crediting. The loan will be granted in case Greece cannot finance its needs on its own from the international markets and only after a unanimous agreement by all the countries members of the euro zone. The “support” will be bilateral – two thirds of the necessary money will come from the countries members of the euro zone and one third from the International Monetary Fund.

Analyzers from Financial Times comment that the presence of the IMF in this deal is symbolical and the goal of the financial organization is to give a more serious credibility to the financial support for Greece. Specialists however make the conclusions that the only choice of the Greeks is to take immediate (if it is necessary also additional) internal economic measures for the decrease of the national deficit, which will send a positive signal to the capital markets and the plan for support will not be necessary.

At the same time the chairman of the European central bank Jean – Claude Trichet announced that the European financial institution he represents will accept Greek government bonds as a guarantee for a loan in 2010 as well as in 2011. “The board of directors of the bank decided to keep the lowest possible limit of BBB- after the end of the current year as well,” said Trichet during the summit of the countries members of the European Union. This gave a breath of fresh air to the Greek banks who own Greek government bonds and will be able to be financed by the ECB under the condition that in the future the assessment houses do not decrease the credit rating of the banks under BBB-. The difference however will be that the Greek banks will borrow money with higher interests and in lower amounts compared to their German colleagues who own German government bonds at a credit rating of AAA.

The Greek financial crisis turned out to be a corner stone in the creation of new control policies within the Euro zone. At the summit was taken the decision for the creation of a new organization in the European Union which will supervise and assess the existing fiscal risks inside the countries members of the EU. The goal of the new organization is to coordinate the economic policy of the countries members and to prevent the rise of other similar to the “Greek drama” cases. The German chancellor Angela Markel underlined that from now on attention has to be paid to the measures against the countries which do not perform their duties in the Euro zone in order to prevent future financial problems in the Euro zone.


Tags: EconomyMarketsFinancial support for Greece
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