FACTBOX-Terms of euro zone emergency loans to Greece

April 23 Fri Apr 23, 2010 9:55am EDT

April 23 (Reuters) - Greece asked for emergency loans from the euro zone and the International Monetary Fund on Friday. Below are the key points of an agreement between euro zone finance ministers from mid-April on the terms of such loans, if Athens is unable to finance its large debts in the market.

WHO WOULD LEND TO GREECE?

All countries using the euro single currency and the International Monetary Fund. Euro zone member states would contribute to the loans according to their respective holdings in the European Central Bank capital. For a detailed breakdown see: (here)

BURDEN-SHARING IN LOANS

The euro zone would provide two-thirds of all loans requested by Greece and the IMF would supply the remainder.

LENGTH OF STAND-BY LOAN PROGRAMME

Three years

THE AMOUNT

30 billion euros from the euro zone in the first year. The amounts for 2011 and 2012 have not been decided yet because it is impossible at this stage to determine how much Greece could need in those years, the European Commission has said.

But the uncertainty about the total funds available weigh on market sentiment.

The IMF has not said how much it could lend Greece, but sources said it could be up to 10-to-12 times its IMF quota of $1.25 billion, which would mean $12.5 billion to $15 billion (some 11.1 billion euros).

A senior Greek finance ministry official has said he would expect the IMF to lend Greece at least 10 billion euros in 2010. The official also said it was logical to expect the package would amount to significantly more than 40 billion euros over three years. Earlier, he had said it could hit 80 billion euros, but later corrected that point.

For the full text of the Eurogroup agreement see: [ID:nLDE63A0GE]

Some economists are concerned that while the agreement deals with the near-term effectively, it does not address longer-term problems with Greek finances.

INTEREST

For the euro zone, variable rate loans would be made on the basis of three-month EURIBOR rates, while fixed-rate loans will be based upon the rates corresponding to EURIBOR swap rates for the relevant maturities.

On top of that, there will be a charge of 300 basis points. An additional 100 basis points will be charged for loans longer than three years. In conformity with IMF charges, a one-time service fee of a maximum 50 basis points will be charged to cover operational costs.

The euro zone statement said that, as of April 9,r a three-year loan to Greece would have an interest rate of "around five percent."

The interest on IMF loans is smaller than on the euro zone loans, Economic and Monetary Affairs Commissioner Olli Rehn has said.

HOW TO GET IT

Greece has requested the money on April 23, because it believes it is unable to finance itself on the market.

The ECB and the European Commission will not assess if this is really the case. A unanimous decision of euro zone countries is the final go-ahead.

It is unclear if that must be the heads of state and government or just finance ministers, although in either case a teleconference could be organised quickly.

The ECB pays out the money while the Commission acts as a coordinator of the bilateral loans.

Greece is now in talks with the ECB, the Commission and the IMF on what it needs to do to get loans in 2011 and 2012.

CONDITIONALITY

The loans to Greece are supposed to be linked to conditions, but euro zone sources said Greece would not be asked to make deeper cuts in its budget deficit this year than it has already promised.

Athens plans to reduce its deficit by 4 percentage points in 2010. On April 22, the EU's statistics office revised up the Greek deficit for 2009 to between 13.6 percent and 14.1 percent of GDP.

The European Commission said after the revision that Greek deficit-cutting efforts will have to be intensified in 2011 and 2012 and clearly spelled out.

The IMF is unlikely to impose any new conditions on Greece for this year because the current programme is already more ambitious than the IMF would have asked for, euro zone sources said.

HOW LONG BETWEEN REQUEST AND PAYOUT

In the case of many countries it should be a matter of days, rather than hours or weeks, euro zone officials say. Greece expects to get the funds before May 19, when it has to refinance 8.5 billion euros worth of debt.

The bilateral loans have to get parliamentary approval, but many national governments have put the issue on an accelerated path through parliamentary economic committees.

The IMF has no need for parliamentary approval, so the disbursement of the funds from the IMF could be much faster.

OBSTACLES

The aid is likely to face a legal challenge in Germany but a euro zone source said that the German government has assured the Eurogroup that according to their legal research there was no danger of losing the case.

(Reporting by Jan Strupczewski, editing by Luke Baker and Neil Stempleman)