Greece close to getting multi-billion euro bailout package

Details of the bailout plan for Greece will be made public by the finance ministers of the 16 euro zone nations, who will hold a special meeting in Brussels on Sunday, after the Greek Prime Minister George Papandreau announces in Athens details of new round of austerity measures to reduce the country's debts of over 300 billion euros.

German Chancellor Angela Merkel and French President Nicolas Sarkozy spoke on phone on Saturday and expressed their determination to "act quickly" to implement a rescue plan for Greece, which may involve as much as 120 billion euros (USD 160 billion) over three years, Sarkozy's office said in a statement.

The German and the French governments are playing a key role in efforts to rescue Greece from bankruptcy and they have taken steps to pass laws to dole out their share of the bailout package for Greece, which will be endorsed by their Parliaments before the end of next week.

The spending cuts were agreed to after more than three weeks' negotiations between the European Commission, the European Central Bank, the International Monetary Fund and the Greek government.

A tough austerity programme was the main condition for financial support from the EU and the IMF.

Implementation of a 45 billion-euro rescue package for Greece hammered out by the EU and the IMF on April 11 was held back. The two institutions want the Greek government to reduce deficit from 13.6 per cent of GDP to 3.6 per cent by 2011.

The spending cuts agreed to by the Greek government are expected to save up to 24 billion euros over three years.

It is expected that in the first year, the euro zone nations will give Greece a credit of 30 billion euros. It will be supplemented by a credit of 15 billion euros from the IMF.
Europe's two largest economies Germany and France will participate in the first year of bailing out Greece with 8.4 billion euros and 6.3 billion euros, respectively.
In the next two years, Germany may have to provide an additional 17 billion euros, according to press reports.

The IMF's overall involvement in the bailout during the three-year period might exceed the record standby loan of USD 21 billion given to South Korea in the late 1990s.

Meanwhile, Germany's banks, insurance companies and industries have launched initiatives to mobilise private funds to support the government's efforts to help Greece out of its financial difficulties.

They plan to raise up to 2 billion euros and will use that money to buy Greek bonds, which were given junk status last week by rating agency Standard & Poor's.

They hope this will help calm down the financial markets and reduce the risk of Greece's debt crisis spreading to other heavily indebted euro zone nations such as Portugal, Spain, Ireland and Italy. Germany holds Greek government's bonds worth 31 billion euros.