Debt crisis

European leaders are reportedly ready to approve a bailout plan for Greece worth up to 22 billion euros ($34 billion). Concrete plans will be unveiled on Monday after a meeting of eurozone finance ministers in Brussels, British media reported.

The Eurogroup meeting will also formally approve budget cuts proposed by Athens last week as part of a package of austerity measures to reduce its 2010 budget deficit.

The 16 eurozone members have agreed in principle to "coordinated bilateral contributions" in the form of loans or loan guarantees to Greece if Athens is unable to refinance its debts and asks the European Union for help, the Guardian newspaper reported, quoting an unnamed senior European Commission official.

"The guarantees will facilitate the kind of funds potentially needed in this context," the official told the Guardian.

Contingency plan

One of the options available to rescue Greece involves a series of loans by European partner countries, coordinated by the European Commission. The other would involve the Commission borrowing money on markets and extending loans to Greece that would be guaranteed by EU states.

Another long-term option on the negotiating table is based on a German initiative to establish an IMF-styled European Monetary Fund to provide financial support for cash-strapped eurozone members.

So far, Greece has done everything that its been asked to do by the European Commission, including harsh austerity measures totaling 4.8 billion euros to overcome its debt crisis.

Fiscal austerity

The cutbacks, added to a previous 11.2 billion euro austerity plan, seek to reduce Greece's budget deficit from 12.7 percent of gross domestic product (GDP) to 8.7 percent this year.

Prime Minister George Papandreou's socialist government has raised funds by issuing bonds to offset its ballooning deficit. The initial offering was heavily subscribed. The rescue plan would kick in if Greece found itself unable to find enough buyers for its bonds in the coming months.

European Commission President Jose Manuel Barroso said earlier this week that Brussels was ready to propose a "framework" for coordinated aid.

"We are ready to act if necessary. The technical work is underway but not over yet. The rest is speculation," said Barroso's spokeswoman Pia Ahrenkilde-Hansen.

In February, EU leaders pledged that they would "take determined and coordinated action, if needed, to safeguard financial stability in the euro area as a whole."

Germany denies reports

The German Finance Ministry has denied the Guardian report. "We are not aware that such a thing is planned," a ministry spokesman told news agency Reuters on Saturday.

Any financial assistance offered to Greece would have to avoid breaching the no-bailout rule enshrined in the EU's Lisbon treaty, and accompanied by new proposals to strengthen EU-level surveillance on national economic policies.

The European Commission also denied the report, but said that technical work is continuing and the Commission stands ready to act if need be.

Asked whether the 16 eurozone members had reached a deal on financial support for Greece, EC spokesman Jonathan Todd told reporters on Saturday, "The Commission stands ready to act if necessary. Technical work is ongoing and has not yet been concluded. All the rest is speculation."

smh/nrt/dpa/AFP

Editor: Andy Valvur