Greece, one of the most financially troubled of the eurozone countries, has just been offered $30 billion euros in bailout money and loans.These loans, announced April 11, are set to help relieve the large debt that Greece has incurred since the start of the financial crisis.
The 16 countries that share the euro agreed to the bailout program in a meeting on Sunday. The bailout program is expected to span three years, providing Greece with low interest rates of five percent, according to a report by Yahoo Finance.
These interest rates are far below the market rate of 7.3 percent.
The announcement of the bailout followed statements in early February about the nature of the financial crisis in Greece.
The Greek government reached a budget deficit of 12.7 percent – over three times the accepted maximum under European financial regulations.
Greece reached this deficit through years of spending beyond the means of the Greek economy.
Despite the assurance that the Greek deficit would not directly impact the country’s future within the eurozone, the government’s cost-cutting measures caused widespread protest in Athens and other major Greek cities, especially when the government announced the cutting of civil service salaries.
Rioting and protests have died down since their crescendo in early to mid-February, showing that the populace is waiting to see the government’s next move.
Greece’s crisis seems to have at least come as a warning to Portugal, Ireland, Italy, and Spain. These four other European countries, as noted by The Wall Street Journal, have potentially similar financial troubles but have yet to announce so.
“Today, with the Eurogroup decision, the safety net has taken shape. European solidarity has been fleshed out,” Greek Prime Minister George Papandreou said.
The press release shows hopes that this may be a sign of greater European Union solidarity in the midst of financial crisis.
Reported by The Financial Post on Sunday, the bailout package is expected to be one of the largest in history.
The International Monetary Fund has pledged $10 billion euros in loans in the first year, which was more than was delivered to both Mexico and Argentina during their financial crises.
The deal was formalized after the euro plunged sharply in the previous trading week and the yield on Greek 10-year treasury bonds hit 7.5 percent, the highest yield since 1998, according to Sky News.
However, both investors and the Greek government made it clear that the bailout package is a safety net, only in case Greece can no longer raise the funds to pay off its large debt resulting from high interest rates on international markets.
The bailout package could not have come at a better time, according to Yahoo Finance. Greece has to find $11.5 billion euros by May, and a total of $54 billion euros by the end of 2010 to begin paying off the $300 billion euro debt.
With the opening of the trading day on Monday, the euro rose sharply against the dollar and the pound, as the announcement of the bailout package spread.