Eurogroup OKs more funds for Greece, Spain | Europe| News and current affairs from around the continent | DW | 04.12.2012
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Eurogroup OKs more funds for Greece, Spain

The Eurogroup finance ministers have been generous. After handing out additional money to Greece, they're also looking to bail out banks in Spain and Cyprus.

Private holders of Greek government bonds will have until Friday afternoon (07.12.2012) to decide whether they will sell their certificates back to Athens – albeit with a hefty cut in the value.

The debt buyback program is part of a whole package of measures with which the Eurogroup hopes to help Greece, a plan announced by eurozone finance ministers on Monday (03.12.2012). The money would come from a rescue fund of international donors. If the plan works out, Greece could offload some 30 billion euros ($39.1 billion) of its debt.

The plan must be successful if Greece is to get more credit; lender the International Monetary Fund (IMF) has built up the pressure. "I'm not too worried," said French Finance Minister Pierre Moscovici on Monday. His Irish colleague Michael Noonan even went so far to say that the worst of the euro crisis was over.

"All the talk of a fraction of the eurozone is now over - there is complete agreement in the assessment that the euro is safe," he said.

Media tensions

Greek flags in Athens (photo: Axel Schmidt /dapd)

Greece is still in need of massive help from the European Union

In an interview with the German newspaper Bild am Sonntag, Chancellor Angela Merkel said that despite all the aid measures for Greece there still was the possibility that the country might need a debt haircut at a later stage.

Many have seen her comments as an admission that in the end, taxpayers will end up footing the bill - contrary to the chancellor's earlier assurances that this would not be the case. Austria's Finance Minister Maria Fekter, however, has dismissed the comments that there are any such plans, saying that this would let Athens off the hook too easily.

"Greeks still have to work hard and fulfill their obligations. They cannot just hope that their debt will be cut and they won't have to do anything about it," she said.

Earlier, German Finance Minister Wolfgang Schäuble said that he recognized Greece's efforts, adding that despite the tensions in German or Greek newspapers, he has remained calm. "I, too, have already been pictured in Greek papers wearing an SS uniform," he said. "But at the same time, I meet a lot of Greeks on the street who tell me that they are grateful for our efforts."

Spain's banks need less money than expected

Finance ministers will now have to wait for the results of Greece's efforts to buy back its debt, but they've already set up yet another aid program to help the eurozone. After months of hesitation, Madrid has finally requested help from Brussels, and Spanish banks are due to get some 40 billion euros to get back on their feet. The money is to come from the new ESM rescue fund, with the first tranche set to arrive as early as this month.

Eurozone countries had already promised up to 100 billion euros for Spain's ailing banks just months ago. Finance ministers were therefore relieved that the latest sum was considerably less.

Schäuble views Spain as being in a much better situation than Greece. "I believe that Spain - aside from the problems in its banking sector - is actually more at risk from the contagion within the eurozone than from actual economic problems," he said.

Next up: Cyprus

That, however, was not the end of the list of countries lining up for help. The latest candidate is Cyprus, where banks are also the problem. The country's financial institutions got caught up in the chaos of the Greek debt crisis and have lost a lot in that crisis.

The funds needed by Cyprus 'only' amount to 17.5 billion euros, which in fact is quite a bit less than the aid needed by Athens. But in relative terms it's a massive amount, equivalent roughly to the entire GDP of the little country. This would be a bailout on a scale not received by any other EU country so far in the crisis. Brussels will wait for a detailed report on the island's financial situation before coming to a final decision.

Luxembourg's Prime Minister Jean-Claude Juncker REUTERS/Francois Lenoir

Juncker intends to leave by the end of 2012

Who will follow Juncker?

In addition the financial crisis, the eurozone is also facing an entirely different problem, namely the question of who will succeed its long-time head Jean-Claude Juncker when he steps down at the end of the year. The Luxembourg politician has been in charge since 2005 and over the course of the financial crisis has become a major figure in Europe.

"I've asked you to do everything in order to name another EU finance minister as president of the Eurogroup," he once again reminded his colleagues on Monday.

Juncker has been visibly annoyed by the drawn-out process of selecting his successor. In the spring, the German finance minister had been a favorite, but since the change of government in France Schäuble has fallen out of favor. At the time, Juncker agreed to stay on until the end of the year – but his patience now seems to be wearing thin.

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