European leaders have reached a deal to provide aid to Greece, EU president Herman Van Rompuy said today, in an unprecedented move to stave off a broader crisis in the euro zone.
'There is an agreement on the Greek situation. We will communicate now the agreement to the other leaders,' van Rompuy told reporters gathered at an EU leaders' summit.
The agreement was forged in talks between Van Rompuy, European Commission President Jose Manuel Barroso, French President Nicolas Sarkozy, German Chancellor Angela Merkel, European Central Bank President Jean-Claude Trichet and Greek Prime Minister George Papandreou.
Van Rompuy stressed that their agreement involves Greece's doing 'whatever is necessary, including additional measures' to meet targets agreed with the European Commission, which polices EU countries' budgets.
Greece has to reduce its public deficit this year by four percentage points from the current 12.7%. Van Rompuy stressed that 'the Greek government has not requested any financial support'.
A Spanish source said that details of the aid would be worked out at the latest by next Tuesday, when EU finance ministers are due to hold a meeting.
Luxembourg premier Jean-Claude Juncker, who is head of the group of 16 euro zone countries, later said European leaders had agreed a package of tools to be used in the event of a financial bail-out being required by Greece.
He said that while the 'fine details' had still to be polished, 'the choice of instruments will not make for an awkward moment'.
But Mr Juncker would not go into detail, resisting pressure to spell out whether these would be loans, guarantees or other types of support, mainly envisaged between Greece and individual euro zone members.
The lack of detail in today's statements did not help the euro, which fell by more than two cents at one point, before recovering slightly to stand at just over $1.3650 this evening,
European leaders are keen to prevent Greece's woes from spreading to other highly-indebted euro zone members like Portugal or Spain, plunging the currency area into a bigger crisis that could reverberate around the globe.
But until this week, they have avoided speaking openly about the aid, fearful that it might ease pressure on the government in Athens to enact tough austerity measures needed to bring down a deficit that soared to 12.7% of gross domestic product (GDP) last year - more than four times EU limits.
Athens needs to borrow €53 billion this year to cover its deficit and refinance debts. Its debt pile is expected to grow to more than €290 billion this year and the cost of servicing that debt has soared as bond markets have punished Greece for its financial profligacy.
