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Factbox: Lending to woeful Greece |
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Friday, 16 April 2010 |
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WHO WOULD LEND TO GREECE?
All countries using the euro and the International Monetary Fund. Euro zone member states would contribute to the loans according to their respective holdings in the European Central Bank capital. BURDEN SHARING IN LOANS
The euro zone would provide two-thirds of all loans requested by Greece and the IMF would supply the remaining one-third.
LENGTH OF STAND-BY LOAN PROGRAM
Three years
THE AMOUNT
30 billion euros from the euro zone in the first year. The IMF could lend Greece up to 10-to-12 times its IMF quota of $1.25 billion, which would mean $12.5 billion to $15 billion (some 11.1 billion euros). A senior Greek finance ministry official said he would expect the IMF to lend Greece at least 10 billion euros in 2010. The official also said that it was logical to expect the package would amount to significantly more than 40 billion euros over three years. Earlier, he had said it could hit 80 billion euros, but later corrected that point.
Euro zone officials dismissed as a "misunderstanding" a remark by a German government spokesman earlier this week that the 30 billion would be for three years, rather than just for the first year.
Some economists have expressed concern however, that while the agreement dealt with the near-term effectively, it did not address longer term problems with Greek finances and did not spell out amounts available in 2011 and 2012.
INTEREST
For the euro zone, variable rate loans would be made on the basis of three-month EURIBOR rates, while fixed-rate loans will be based upon the rates corresponding to EURIBOR swap rates for the relevant maturities.
On top of that, there will be a charge of 300 basis points. An additional 100 basis points will be charged for loans longer than three years. In conformity with IMF charges, a one-time service fee of maximum 50 basis points will be charged to cover operational costs.
The statement said that for a three-year loan to Greece as of April 9, the interest would be "around five percent."
The IMF prices its loans less, Economic and Monetary Affairs Commissioner Olli Rehn said.
HOW TO GET IT
Greece has to request the money, because it is unable to finance itself on the market. The ECB and the European Commission then assess if this is really the case. A unanimous decision of euro zone countries is the final go-ahead. It is unclear if that must be the heads of state and government or just finance ministers, although in either case a teleconference could be organized quickly.
The ECB pays out the money while the Commission acts as a coordinator of the bilateral loans.
In a step toward obtaining billions of euros in emergency loans, Greece asked on Thursday for official talks with European authorities and the International Monetary Fund on "a multi-year program of economic policies."
Greece said this "could be supported with financial assistance from the euro-area member states and the IMF, if the Greek authorities were to decide to request such assistance."
Such talks clear a further hurdle for a quick pay-out of the cash, should Athens request it.
CONDITIONALITY
The loans to Greece are supposed to be linked to conditions, but euro zone sources said Greece would not be asked to make deeper cuts in its budget deficit this year than it has already promised. Athens plans to reduce the gap to 8.7 percent from 12.7 percent in 2009.
Any extra conditions that could be attached to the loans would more likely be linked to more structural or administrative reforms or streamlining the flow of statistics information, euro zone source said.
The IMF would not impose any new conditions on Greece because the current program is already more ambitious than the IMF would have asked for, a euro zone source said.
HOW LONG BETWEEN REQUEST AND PAYOUT
The bilateral loans have to get parliamentary approval, but national governments have put the issue on an accelerated path through parliamentary economic committees so "it would be a matter of days" from the moment of request to payout, a euro zone source close to the talks said.
The IMF has no need for parliamentary approval, so the disbursement of the funds from the IMF could be much faster.
OBSTACLES
A German economist has said he would challenge legally the constitutionality of the aid scheme, but the euro zone source said that the German government has assured the Eurogroup that according to their legal research there was no danger of losing the case. The challenge would not delay the payout of the aid, should it be requested.
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