Eurozone agrees on bailout plan for Greece

From left, German Chancellor Angela Merkel, Luxembourg's Prime Minister Jean Claude Juncker, Spain's Prime Minister Jose Luis Rodriguez Zapatero, British Prime Minister Gordon Brown, and Slovenia's Prime Minister Borut Pahor are seen during a group photo at an EU summit in Brussels. AP

The 16 eurozone countries pledged to support Greece by providing a combination of International Monetary Fund (IMF) credit and bilateral loans on market conditions as a "last resort" if their partner can no longer get credits from the capital markets and an insolvency is imminent.

The agreement, which came at a meeting of the heads of state and government of the eurozone countries on the first day of a two-day European Union summit in Brussels yesterday, is based on a compromise plan put forward by German Chancellor Angela Merkel and French President Nicolas Sarkozy.

Merkel vehemently opposed a direct EU financial support for Greece and pressed for involving the IMF in a bailout.Germany is concerned that an EU bailout could be challenged at the country's Federal Constitutional Court because the EU treaty bars its members from taking over each other's debts.

Moreover, a direct EU help for Greece would set a bad precedent for other eurozone nations with huge debts such as Portugal, Ireland, Spain and Italy.
A crisis mechanism to deal with the situation in Greece has been put in place, President of the European Council Herman Van Rompuy told reporters after the eurozone leaders' meeting.

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