Eurozone agrees on bailout plan for Greece

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.