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May 01, 2010

Agreement Reached on Financial Rescue Package for Greece

European Union finance ministers are expected to announce the amount of a massive, EU-International Monetary Fund rescue package for Greece, hours after the parties reached agreement on it.

The European Union-IMF rescue package comes with a painful caveat - agreement by Athens to take further austerity measures, notably cutting public salaries, bonuses and pensions and raising taxes.

Greek Prime Minister George Papandreou outlined the details in a nationally televised address Sunday. He said he would do anything to avoid Greece going bankrupt and he urged Greeks to accept great sacrifices.

At a news conference later, Greek Finance Minister George Papaconstantinou said the belt-tightening measures would help his country get back on its feet.

"These measures have a counterpart and the counterpart is the significant financial help through this mechanism that we helped create and which is a step, a big step forward for the European Union," said George Papaconstantinou, Greek Finance Minister. "Through this mechanism and this financial help Greece will be shielded from the international markets and will be able to put its house in order."

In Brussels, finance ministers from the 16 EU nations sharing the euro currency, including Greece, met to give final approval to the rescue package. The final deal is expected to be endorsed by European leaders at a special summit later this month.

As he arrived at Sunday's meeting, EU Monetary Affairs Commissioner Olli Rehn gave a thumbs-up to the new Greek spending cuts.

"The Greek government has today announced a very comprehensive and ambitious economic program which I indeed welcome," he said. "I'm confident that the eurogroup, the euro area member states, will today endorse this program and I'm recommending to the eurograoup today to activate the [aid] mechanism."

The aid deal comes after weeks of negotiations. Eurozone member Germany has been particularly reluctant to endorse an agreement without further austerity measures from Athens.

In Greece, tens of thousands of protesters took to the streets Saturday to register their unhappiness with the belt tightening. Greek unions have called for a national strike on Wednesday.

The Greek government says it has no other choice but to cut spending, faced with the country's skyrocketing public debt and deficit. Last week, ratings agencies downgraded Greece's ratings to junk status.