After months of political wrangling euro-zone finance ministers have endorsed a massive 30-billion-euro ($40 billion) emergency aid mechanism for debt-ridden Greece.
The euro-zone rescue package should calm the markets
Euro-zone ministers approved the terms of a 30-billion-euro rescue package for debt-ridden Greece should Athens be unable to finance itself. The International Monetary Fund (IMF) will also contribute at least 10 billion euros to the recovery fund in the first year.
"With today's decision, Europe sends a very clear message that no one any longer can play with our common currency, no one can play with our common fate," Greece's Prime Minister George Papandreou said in a statement.
After a two-hour telephone conference, finance ministers from the euro area said in a statement they were ready to provide financing via bilateral loans centrally pooled by the European Commission as part of a package including IMF financing.
Greece will be able to borrow from euro-zone governments and the IMF at an interest rate of five percent, significantly below market rates, said European Economic and Monetary Affairs Commissioner Olli Rehn.
Jean-Claude Juncker and Olli Rehn unveil financial aid package for Greece
A Greek Finance Ministry official said the loan option will only be a final recourse and is primarilly designed to ease skeptism of Athens' ability to handle its 300 billion euro national debt.
Finance Minister Giorgos Papaconstantinou described the move by the euro-zone member states as a "sign of confidence" in Greece. The Greek minister stressed that Athens had not requested bilateral aid and hoped Greece would continue to be in a position to finance itself via the market.
The chairman of the euro-zone finance ministers, Jean-Claude Juncker, told a news conference in Brussels that the planned aid package was designed to help Greece meet its financial obligations.
"We call on the Greek government to implement all these measures in a rigourous and determined manner to effectively reduce the budget deficit by four percent in 2010," said Juncker, Luxembourg's prime minister.
"If the mechanism had to be activated, it would not be a violation of the no-bailout clause (in the European Union treaty) since the loans are repayable and contain no element of subsidy," he added.
Juncker said data provided by Greece suggested Athens was on track to reach its targets for 2010, as it tries to implement a strict fiscal consolidation program.
Editor: Mark Hallam