BRUSSELS/ BRATISLAVA, July 22, (WEBNOVINY) – Euro zone leaders adopted important decisions on Thursday to prevent the contagion of debt crisis in Europe, paving the way for a controlled default of Greece. Slovak Prime Minister Iveta Radicova confirmed this information following an unscheduled euro zone summit in Brussels, adding that not only Greece was involved but also the future of the euro zone as such was high on their agenda. “Europe is grappling with a serious systemic problem the solution of which is not solely about bailing out one country but about seeking procedures to prevent the debt crisis spillover,“ she noted. The prime minister is against any political abusing the topic in Slovakia. “Unless we intervene deliberately and reasonably, we will very quickly feel the painful impact [of the crisis],” she announced.
On Thursday, heads of euro zone governments agreed to employ all available tools to prevent the sovereign-debt crisis from spreading, even at the cost of Greece’s selective default. As a result, the maturity of future EFSF loans to Greece will be extended to the maximum, from the current 7.5 years to a minimum of 15 years and up to 30 years with a grace period of 10 years. Interest rates on these loans will come down from the current 4.5-5.8 percent to 3.5 percent for Greece. The country will thus be able to refinance itself on financial markets at lower rates than other countries without soaring debts. The EFSF will have the opportunity to enter the restructuring of banks via direct loans to governments.
Ahead of the summit, Dutch Finance Minister Jan Kees de Jager confirmed that Europe would no longer demand that a selective default be avoided, Reuters reported. Eurogroup President Jean-Claude Juncker provided a similar position. European leaders prepared three alternatives of the private sector participation: buy-back of Greek government bonds, prolongation of their maturity and their exchange for new ones under new terms. Radicova foretold that rating agencies would declare Greece’s restricted default in reaction to this decision. Euro leaders also agreed to accept Greek collateral.
Prime Minister Iveta Radicova also reported that the contribution of the private sector will be almost equal to the share of the public sector. By 2019, its contribution is expected to accrue to EUR 106 billion. At the press conference following the summit, the Slovak prime minister confirmed that some leading bank houses in Europe affirmed their participation. The second bailout package was agreed at 109 billion euros. The agreed solutions also contain the so-called Marshall Plan to refresh the competitiveness of the Greek economy.
Slovak Finance Minister Ivan Miklos has hailed the summit outcomes. “He appreciates particularly the strong participation of the private sector in the stabilization programs, which was Slovakia’s core requirement,” ministerial spokesperson Martin Jaros reacted. He further highlighted the pledge to bolster commitments to reduce budget deficits across the euro area. As Jaros added, Slovakia has already embarked on this path that will result in a healthier and sustainable monetary union.
SITA