France, Germany agree on plan to help Greece

France and Germany agreed on a standby aid plan for heavily indebted Greece on Thursday that would involve money from European Union member states and the International Monetary Fund, the French president’s office said.
French officials said President Nicolas Sarkozy and German Chancellor Angela Merkel had explained their agreement to EU President Herman Van Rompuy, and countries that use the euro would discuss it later on Thursday. A French official said the deal, agreed in Brussels shortly before an EU summit, opened the way for bilateral loans to be made available under a system mainly involving the euro zone but also using money from the Washington-based IMF.
“There is agreement on the idea of a European framework. This European framework will be made up of coordinated bilateral loans,” a French official said.
“This European framework would be complemented by IMF loans with clear mention of the fact that the financing would mainly be European.”
The money would be used only if there were “very serious difficulties and there was no other solution,” he said.
A German official said euro zone states would have to agree to activate the plan, giving Berlin a veto.
The borrowing rate would not be subsidised but would take into account the economic state of the country using the loans.
“This is the framework set out to help countries that could be under very strong market stress,” the French official said.
Greece has not asked for money to help service its debts but has said it favours a standby package being made available to reassure investors without Athens having to use the money.
Merkel and Sarkozy also said the Greek debt and deficit crisis showed the need to strengthen economic governance in the euro zone — meaning closer coordination of policy — to deal with any threats like those in Greece.
An EU official said any agreement would include increased budgetary surveillance of euro zone countries.
“The IMF is a key part of it,” the EU official said. “There are two parts. There is a part on bilateral loans and there is a part on … surveillance.”
Paris and Berlin called for Van Rompuy to draw up a report before the end of this year laying out all the options for strengthening preventive mechanisms and sanctions.