Making the Greek debt more sustainable

On Monday 11 July, the Eurogroup agreed to propose concrete measures that will strengthen the euro zone's capacity to reduce the risk of the debt crisis spreading from Greece to larger member states such as Italy, by making the Greek debt more sustainable.

Mr Jean-Claude Juncker,
Luxembourg Prime Minister, President of the Eurogroup
© European Union 2011

This strategy should provide the basis for an agreement within the Eurogroup on the main elements and financing of a second adjustment programme for Greece. The concrete measures that will be presented to ministers as soon as possible, include:

• enhancing the flexibility and the scope of the bail-out fund, called the European Financial Stability Facility (EFSF);
• lengthening the maturities of the loans, and
• lowering the interest rates for countries currently receiving bail-out loans from the EU, including through a collateral arrangement where appropriate.

There are a variety of ways of enhancing the flexibility of the bail-out fund - the specific new powers that the fund would be granted were left to be defined by the Eurogroup.

The signing of the European Stability Mechanism (ESM)

On Monday, Eurogroup ministers also signed the treaty establishing the permanent crisis mechanism, ESM, which is to replace the temporary bail-out fund, the EFSF.

It will be operational in 2013, after member state ratification.

For details about the ESM, please see the article below.
European stabilisation mechanism adopted
ESM Treaty text (pdf)