Eurozone discusses reducing cost of loans

BRUSSELS – Borrowing rates to Greece and Ireland could be set to drop, as several members of the eurozone deem it logical, according to Greek Finance Minister Giorgos Papaconstantinou, although any decisions will have to form part of a more general solution, he stated yesterday. Speaking after the end of a two-day Ecofin Council in the Belgian capital, Papaconstantinou suggested that the possibility of bringing down the interest rates at which Greece and Ireland have borrowed money from the European Financial Stability Facility is now formally under discussion. However, the negotiations will be hard, as it is a delicate political issue likely to provoke a negative reaction from Northern European member states. In order to appease them, the rest of the bloc will probably seek more assurances from Greece and Ireland regarding their strict adherence to the terms of the EU-IMF agreement. For Greece, this may entail a more ambitious (or tougher) austerity plan with more structural reforms. According to the agreement with Greece’s creditors, Papaconstantinou will need to present specific fiscal and structural measures by the end of March to save some 12 billion euros in the 2012-14 period. This would have to be a three-year plan with clear targets, reliably describing how they would be met in order to satisfy the eurozone and the markets. Unfortunately for Papaconstantinou, the decision for an extension to the repayment period for the 110-billion-euro loan will have to wait: Berlin and some other eurozone governments will need to have the issue voted through their national parliaments, although one European official predicted that the extension would be granted to Greece and Ireland by the end of this month.