By: Mike Campbell
To the surprise of nobody who ever thought about the situation, the Eurozone countries have agreed a plan that puts in place emergency funding for Greece should it prove impossible for her to get funding from the usual sources. The prosperity of major European states like France and Germany is tied to the stability and viability of the Euro and it was quite certain that the Eurozone would act to protect their common interests. The only surprise is that it should have taken this long. Of course, the dwindling value of the Euro makes European (Eurozone) exports cheaper for the rest of the world to buy. That competitive edge will help Eurozone countries to recover from the global financial crisis more quickly and should boost employment within the zone. In essence, the market has provided a devaluation of the currency which the members of the group could not have done themselves. Of course, there has to be a hard bottom to such a policy and a very important factor in the equation is investor confidence in the Euro, so the move is timely.
The plan that was agreed in Brussels, yesterday, puts together €22bn in emergency funding that can be tapped if the usual funding channels open to Greece fail. Two-thirds of the money would be provided through co-ordinated bilateral loans with the final third, presumably, being provided by the IMF. The plan would require the assent other 11 EU members who are outside of the Euro and would need the unanimous agreement of the rest of the Eurozone members should Greece ever need to call on the facility. The plan is not so much a practical tool to help Greece as a clear statement of intent from the block that the Euro will be supported should it become necessary.