Wednesday, July 27, 2011

The shaky basis of the Greek rescue

by Pieter Spiegel

Financial Times

July 26, 2011

Did the eurozone’s presidents and prime ministers understand the Greek rescue package they signed up to on Thursday after an eight-hour emergency summit in Brussels?

That was the question buzzing around the European Council’s headquarters for hours after leaders returned to their hotel suites, since senior aides from the key capitals spent much of the night giving conflicting accounts of what, exactly, the surfeit of numbers meant.

It would be easy to chalk up the confusion to yet another example of the European Union’s inability to communicate to financial markets. Except that days after the deal was struck, confusion still reigns.

How much will the eurozone’s €440bn bail-out fund need to raise for Athens – and how quickly? Is the estimated €33bn in Greek bonds to be repurchased in a buy-back programme any more than a number pulled out of thin air? And is the International Monetary Fund going to shell out a third of the €109bn total bail-out package, as it has in the past, or just a third of the €34bn in new direct loans to Athens?

The truth is, nobody knows. “Not everything has been agreed in detail so not everything can be explained yet,” chuckled one senior EU official involved in the negotiations.


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