EU to decide Greek loan extension in early 2011

[December 09, 2010]  VOULIAGMENI, Greece (AP) -- The European Union will likely decide early next year on extending Greece's repayment period for the bailout loans that saved the country from default, top EU economic official Olli Rehn said Thursday.

Greece is in negotiations to get more time to repay loans worth up to euro110 billion ($145 billion) from the European Union and International Monetary Fund. EU governments had earlier said they were considering pushing back the start of repayments by 4 1/2 years past the currently agreed 2013 date.

Rehn said the European Commission was examining the date extension "following the decision to do so by the EU finance ministers."

"We stand ready to make the concrete proposal early next year, and I'm certain that it will receive the support of EU finance ministers," the commissioner told reporters after meeting with Greek Finance Minister George Papaconstantinou.

Speaking at a conference outside Athens earlier in the day, Rehn said that the extension "will mean that we will be able to go beyond and stabilize (Greece's) debt dynamics and overcome the hump in debt repayment, especially in 2014 and 2015."

"This will certainly reinforce stability and confidence in the Greek economic reform program," he said.

Rehn expressed "sincere admiration" at the progress of Greek financial reforms.

On Tuesday, IMF managing director Dominique Strauss-Kahn said on a visit to Athens that he supported the extension without imposing additional demands for economic austerity.

The European Union is seeking to toughen fiscal rules for countries using the euro to prevent a repeat of the crises seen in Greece and Ireland and contain the debt market turmoil.

Rehn said the EU was determined to see the reforms through, adding that sanctions for overspending would inevitably be part of a future enforcement mechanism.

"We are taking fundamental measures to reform our economic governance," he said. "Let me be very clear on this: We will not stop until we have accomplished our mission no matter what the challenges might be."

He added: "We need effective enforcement ... Of course sanctions in the midst of a crisis serve no purpose when the damage is already done. But at an early stage they raise the credibility of the rules."

[Associated Press]

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