Eurozone throws its weight behind Greece...finally

In a bid to restore confidence in their common currency, all 16 eurozone leaders have reportedly agreed to provide joint financial assistance to the debt-laden Greece in tandem with the International Monetary Fund (IMF). The euro rose on Friday from a 10-month low against the dollar after European Central Bank (ECB) president Jean-Claude Trichet toned down his opposition to the IMF's involvement in a Greek rescue plan. "Europe has taken a big step in the face of a big challenge," Greek Prime Minister George Papandreou told reporters after talks in Brussels, declaring himself satisfied. European Council President Herman Van Rompuy called the deal significant not just for Greece, but for the stability of the eurozone.

Backers of the plan included French President Nicolas Sarkozy, according to reports. Sarkozy previously had opposed a role for the Washington-based IMF. The deal was brokered during a summit in Brussels. The French President said that the eurozone would put up two-thirds of the money, and the IMF the rest. Terms imposed by German Chancellor Angela Merkel mean that the concerted EU-IMF mechanism could be activated only under strict conditions and would require the unanimous approval of the eurozone. Greek Finance Minister George Papaconstantinou said that the deal removed the risk of default by his country. He also said that no aid was being given to Greece as of now.

EU leaders were under pressure to come up with a detailed plan to aid Greece, amid mounting worries that the debt troubles in countries like Greece, Portugal and Spain could spread elsewhere in the euro zone. Eroding confidence in the euro was also among the factors that influenced the outcome of the Brussels summit. The euro fell to a 10-month low against the dollar in afternoon trading on March 25 after the Trichet reportedly said that getting help from the IMF to solve the region's debt problems would be very, very bad. Separately, Zhu Min, the deputy governor of the People's Bank of China, said that the Greek debt crisis was only the tip of the iceberg and complained that Europe had offered no decisive action on the matter.

Earlier, the ECB took some pressure off Greece by extending emergency lending rules, saying that its bonds won’t be cut off from ECB refinancing operations next year in case Moody’s lowers its rating to a level comparable with other companies. That decision marked a reversal for the ECB, which said in January that it wouldn’t soften its collateral policy for the sake of a single country. The bank was scheduled to reintroduce pre-crisis rules at the end of 2010.