Eurozone ministers back Greek bailout package

13 Mar 12
Eurozone finance ministers have agreed to the latest €130bn bailout package for Greece and stepped up the pressure on Spain to reduce its budget deficit.

By Nick Mann | 13 March 2012

Eurozone finance ministers have agreed to the latest €130bn bailout package for Greece and stepped up the pressure on Spain to reduce its budget deficit.

Meeting in Brussels last night, the ‘eurogroup’ said it welcomed the bond swap deal Greece agreed with its private sector creditors on Friday, which was a key pre-condition of the bailout going ahead.

Speaking after the meeting, the chair of the group, Luxembourg’s prime minister Jean-Claude Juncker, said the bailout package represented an ‘unprecedented’ level of support that would ‘ensure Greece’s future within the euro area’. Eurozone countries will now formally approve the bailout on Wednesday.

Juncker added that he expected a ‘significant’ contribution from the International Monetary Fund towards the bailout package. On Friday, IMF managing director Christine Legard proposed a €28bn contribution, but this still has to be approved by the body’s executive board when it meets on Thursday.

Finance ministers also called on Spain to achieve a greater-than-planned reduction in its budget deficit this year. Earlierthis month, Spain revised its deficit forecast for 2012 up from 4.4% of gross domestic product to 5.8% and also confirmed its deficit was higher than planned last year.

The eurogroup said it welcomed Spain’s commitment to bring its deficit down to below 3% of GDP by 2013, in line with the fiscal compact signed by 25 European Union countries on March 1. But it added that for this goal to be reached, Spain would have to cut its deficit by more than expected this year.

‘The eurogroup assesses that the timely correction of the excessive deficit should be ensured by an additional frontloaded effort of the order of 0.5% of GDP, beyond what has already been announced by the Spanish authorities so far,’ it said.

This would also require ‘an early adoption and strict implementation of the new mechanisms in the Budget Stability Law on the monitoring and control of budget compliance at different levels of government’. The finance ministers added that the Spanish government had ‘expressed its readiness to consider this in the further budgetary process’.

Spain is expected to finalise its budget for 2012/13 later this month.

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