EU, IMF to spend 135 billion euros to bailout Greece
The bailout of debt-laden Greek economy will see a bailout package worth 135 billion euros from the European Union and the International Monetary Fund over a period of three years.
The new package is much higher than the 45 billion euros offered about three weeks ago. The Greek economy moved towards bankruptcy after the rating agency Standard & Poor's brought down the creditworthiness to junk status this week.
The downgrading in its rating had made it impossible for the country to get credits from the financial markets. The EU had agreed to a 30 billion euros bailout package on April 11 together with a credit of 15 billion euros from the IMF however it is likely that it won’t be sufficient to cover the debts of the country amounting to over 300 billion euros.
The German federal minister for economic affairs Rainer Bruederle estimates that the EU and the IMF will have to share a burden of at least of up 135 billion euros over the next three years. Germany will share about over 20 per cent of this burden which means about 30-35 billion euros.
The earlier bailout package agreed upon by the 16 Eurozone nations has not been activated yet because Germany has demanded that Greece take more stringent measures to reduce its huge deficit and stabilize its ailing economy.
Germany and France are expected take the lead in bailing out Greece from its financial trouble. There are efforts to get the approval in Berlin enabling Greece to meet a May 19 deadline for repaying debts amounting to 8 billion euros.
"We are now in a phase where the IMF and the European Commission have to work out a programme with Greece," said Chancellor Angela Merkel.
The bailout package is highly subjected to tougher measures by the Greek government to control its spiraling financial situation. Greek government is being asked to control its 24 billion euros of budget deficit.
IMF is asking the Greek Government to raise sales taxes, scrap bonuses amounting to two extra months pay and also announce a pay freeze for the next three years.
The German financial and industrial firms will contribute to the bailout package. Efforts to raise the money are lead by Deutsche Bank Chief Executive Josef Ackermann. Meanwhile, European Commission has indicated that the final rescue plan will be finalized by Sunday.
The finance ministers of all Euro zone nations will meet on Sunday to discuss Greece and held a preliminary conference call on Friday, according to French Foreign Minister Bernard Kouchner.
"What's decisive now is that Greece sticks to the rules of the Stability Pact and the data from Greece are accurate, and that Greece takes the austerity measures seriously -- and that appears to be the case," Finance Minister Wolfgang Schaeuble.
European Commission President Jose Manuel Barroso has said, Greek rescue package is important because it will prevent the crisis from spiraling over to other countries.
