• Euro Area Members Commit Up to €30 Billion in Loans to Greece
  • April 21, 2010 | Author: Darren M. Cooper
  • Law Firm: Alston & Bird LLP - Washington Office
  • Yesterday, the heads of state and government of the Euro area announced that Euro area members states have agreed upon the terms of financial assistance to be provided to Greece, "when needed, in order to further safeguard financial stability in the Euro area as a whole."  According to the statement, Euro area Member States are "ready to provide financing" to Greece via bilateral fixed- and floating-rate three-year loans as part of a "joint programme to be to be designed with and cofinanced by" the International Monetary Fund. The joint programme will build on the recommendations adopted by the Ecofin Council this past February and comes a few weeks after the 16 leaders of the Euro area member states had committed to "contribute coordinated bilateral loans" to Greece.

    The statement indicates that, "In order to set incentives for Greece to return to market financing," the loans "will be granted on non-concessional interest rates," with pricing for variable-rate loans based on 3-month Euribor and fixed-rate loans based on "Euribor swap rates for the relevant maturities," plus a "charge of 300 basis points."  A further 100 basis points are charged for amounts outstanding for more than 3 years. The statement indicated that, as of April 9, the rate would be "around 5%."  Up to €30 billion would be contributed by member states in the first year. 

    IMF Managing Director Dominique Strauss-Kahn "welcome[d]" the financial support package that will be provided by Euro area member states to Greece, noting that the agreement "marks a very important step." He said that the IMF "stands ready to join the effort" to provide financial assistance to Greece "to the extent needed and requested by the Greek authorities."