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€30 billion for Greece from the Eurozone

12 April 2010 / 08:04:30  GRReporter
3012 reads

Victoria Mindova

Eurozone country members have decided to grant Greece €30 billion by the end of 2010. The IMF is obliged to grant another €15 billion. Two thirds of the financial aid burden will be distributed to the Member States of the eurozone and one third to the IMF. Greece will be able to be credited with a floating or fixed rate and the loan will be granted a three-year period, said Finance Minister Georgios Papakonstantinou at a special news conference on Sunday evening. The press conference was preceded by a video conference call between eurozone finance ministers, which took place on Sunday afternoon. 

The fixed rate is 5% and will be calculated based on the average crediting cost in the eurozone (swap rate), to which added are 300 basis points. According to data from April 9, 2010 the swap rate was 1.85% and when 300 basis points were added the interest formed to 4.85 percent. When loan costs are added the fixed interest financial "aid" is formed around 5%. 

For floating rate, which is formed under 4% assumed is a base of quarterly interest rate of the European Central Bank, to which 300 basis points are also added. On the day of shaping the final version of the rescue plan its value was 1.85%. The total value of the interest rate is formed around 3.85%, taking in mind the cost of servicing the loan. In the event that Greece asks for a longer period for repayment of the loan, lenders will add 100 basis points to the already formed until that point interest rates. In other words, if Greece takes a loan for five rather than three years the fixed rate will increase with about 6 percent and the float rate to about 4.85% -5%. 

Financial experts say that if and when Greece required financial assistance, the interest rates presented by the Ministry of Finance will not differ drastically from the real ones. 

In an official statement after the special meeting of eurozone ministers, members of Eurogoup expressed their positive attitude towards the positive development of the Greek economy in the coming months. "Members of the Board of Eurogoup welcome the actions undertaken by the Greek government until now and the implementation of Budget 2010 and believe that the measures taken to date will give positive results," says the report of the eurozone ministers. 

The Greek government continues to state that today's decision by the finance ministers of the euro area is only a last resort solution for the country in case it is unable to finance its debt from international markets. Unanswered remains the question why Greece does not want to take advantage of the assistance despite the provided favorable interest rates. According to financial analysts, the aid for Greece is not unconditional and exactly for this reason the conditions under which the aid will be given makes the Greek government not in a hurry. 

What these conditions are, did not become clear.

Tags: IMF Eurogroup eurozone Greece Economy financial aid
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