EU Finance Ministers Back Plans For Financial Aid To Greece

Finance ministers of the countries in the EU have given their backing on Tuesday to plans by euro zone countries to provide financial aid to Greece if the troubled nation falls in a situation where it cannot refinance its debt. The aid, if it happens, will be the first such in the eleven year history of the euro zone.

"It will be decided by the European Council (of EU leaders) when the time comes, if and when Greece were to ask," said Elena Salgado, Spanish Economic Minister, in a news conference at the end of a two day talk in Brussels. Earlier, ministers from the euro zone countries had reached an agreement on “technical modalities”, which would assist in ready availability of aid, in case Greece needed one. However, the ministers did not divulge any details on the size of the aid. The backing for an aid plan was reiterated again on Tuesday at the meeting of finance ministers from the EU.

European Commissioner Olli Rehn said that Greece’s plan to cut its deficit to 8.7% of GDP from 12.7% of GDP this year is realistic. He also said that the plans take into consideration the forecast for a 2% contraction in Greek GDP due to the austerity measures.

The new development did not see any major reaction from the markets, with the euro and bond yields remaining largely unchanged. According to economists, the step taken by the EU to back any aid, if required, for Greece is in the right direction.