EU rushes to help Greece, after months of talks

Brussels – EU leaders are preparing a multi-billion euro emergency loan package for debt-laden Greece after months of talks dogged by German reticence and the unprecedented nature of the crisis.

European Union president Herman Van Rompuy confirmed, during a trip to Japan, that the 16 eurozone leaders would hold an emergency summit in Brussels on May 10 to activate the programme of loans already agreed in principle.

That would mean EUR 30 billion of eurozone money and a further EUR 15 billion from the International Monetary Fund available in 2010 to help Greece avoid defaulting on its massive debts.

That is as long as EU officials deem the request from Athens justified.

The timing of the eurozone summit is crucial.

Germany has been unwilling to promise any cash for Greece ahead of key regional elections on May 9.

Greece needs to pay back EUR nine billion of existing loans by May 19.

While there is a feeling of urgency among political leaders, the crisis first exploded last November, when Greece radically revised its figures for the national budget deficit in 2009.

European leaders held and extraordinary summit on the Greek crisis on February, where they pledged solidarity with Athens.

There was a second summit in March to thrash out the form the aid would take, followed by a meeting of finance ministers on April 11 to discuss the total to be offered and the interest rate to be charged,

“The management has been catastrophic,” as Europe’s aid will arrive far too late, Daniel Cohn-Bendit, head of the Greens in the European parliament told AFP.

He, like other observers, deems it now “inevitable” that Greece’s debts will have to be rescheduled due to the delay.

While the clock has ticked, the rate Greece has to pay to borrow on international markets has ticked ever upwards.

On Wednesday afternoon Greek bond yields, its cost of borrowing, stood at 9.9 percent, more than three times what eurozone powerhouse Germany has to pay.

Much of the eurozone foot-dragging has been due to Germany’s reticence to offer money, amid fears the funds could fall into a bottomless pit of debt.

Germany would likely never again see any loans it might provide to debt-wracked Greece, a top economist in Berlin said on Wednesday, as Chancellor Angela Merkel hosted a series of talks on the crisis.

Merkel fears a backlash of public opinion ahead of the regional polls, with German voters largely hostile to a bailout.

Luxembourg Prime Minister Jean-Claude Juncker, who presides of the Eurogroup of finance ministers, has criticised what he calls the German government’s “hesitant” approach to Europe in the wake of the Greek debt crisis.

A decision on May 10 by the 16 eurozone nations, including Greece, to unlock the loans would make it easier, or at least less politically damaging, for the German government to approve its part of the loans.

“We have to wait till May for Chancellor Merkel,” one European diplomat said.

However Europe has also been slowed down by the unprecedented nature of the crisis for the eurozone, with no procedure in place to deal with it.

Eurozone rules in principle ban any rescue package for a member state.

However with contagion spreading among other nations with burgeoning debt problems – Portugal on Tuesday saw its own credit rating downgraded – it has been clear for some time that some solution had to be patched together.

Berlin and some other capitals very keen on budgetary discipline refused, when the monetary union was being created back in 1999, to envisage any bailout mechanism, fearing such a safety net would foster indiscipline.

Greece’s European partners are way past that fear now.

AFP / Expatica