Greece crisis: EU 'nears end' of Greece rescue talks

What went wrong in Greece?

An old drachma note and a euro note
Greece's economic reforms that led to it abandoning the drachma as its currency in favour of the euro in 2002 made it easier for the country to borrow money.
The opening ceremony at the Athens Olympics
Greece went on a debt-funded spending spree, including high-profile projects such as the 2004 Athens Olympics, which went well over budget.
A defunct restaurant for sale in central Athens
It was hit by the downturn, which meant it had to spend more on benefits and received less in taxes. There were also doubts about the accuracy of its economic statistics.
A man with a bag of coins walks past the headquarters of the Bank of Greece
Greece's economic problems meant lenders started charging higher interest rates to lend it money and widespread tax evasion also hit the government's coffers.
Workers in a rally led by the PAME union in Athens on 22 April 2010
There have been demonstrations against the government's austerity measures to deal with its 300bn euro (267bn) debt, such as cuts to public sector pay.
Greek Prime Minister George Papandreou at an EU summit in Brussels on 26 March 2010
Now the government is having to access a 110bn euro (95bn; $146.2bn) bail-out package from the European Union and International Monetary Fund.
Greece's problems have made investors nervous, which has made it more expensive for other European countries such as Portugal to borrow money.
Greece's problems have made investors nervous, which has made it more expensive for other European countries such as Portugal to borrow money.
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The European Union (EU) is on the verge of agreeing the details of an emergency plan to rescue Greece's economy, a senior official has said.

EU Commissioner for Economic and Monetary Affairs Olli Rehn said leaders were "about to conclude talks" on the package.

His comments came as European markets rose after two days of sharp falls on concerns about Greece's debt crisis.

The euro also gained ground against the dollar after heavy falls this week.

By mid-afternoon trading, the main stock markets of Paris and Frankfurt had risen by about 1%, while shares in London were up 0.6%.

The Athens stock market had surged more than 7%.

The euro had risen by more than a cent against the dollar, to $1.3271.

Mr Rehn said the European Commission, the European Central Bank and the International Monetary Fund (IMF) had been working hard on a programme that will "reverse the debt spiral of Greece and restore its overall competitiveness".

"I am confident that the talks will be concluded in the next days," he added.

Mr Rehn said any loans to Greece would be conditional on it reducing its debt levels and implementing "structural reform".

Domino effect

The chief architect of Greece's entry into the eurozone has warned of the consequences of failing to act quickly to rescue Greece's debt-laden economy.

In an exclusive interview with the BBC, Yannos Papantoniou, Greece's Economy Minister between 1994 and 2001, urged Europe to act "at very high speed" to rescue the economy.

Greece must be prevented from becoming "the Lehman Brothers of the sovereign debt crisis", he added.

Start Quote

We have lost a lot of time... the reputation of the eurozone has been hurt ”

End Quote Dr Yannos Papantoniou Former Greek economy minister

The collapse of investment bank Lehman Brothers in 2008 triggered the global banking crisis and contributed to a worldwide recession.

Some economists are concerned that if Greece's debt crisis is not resolved swiftly, other countries with high borrowing levels could also struggle to repay their debts, as investors lose confidence in some European government bonds.

This week, heightened concerns about the outlook for the Spanish and Portuguese economies led ratings agency Standard & Poor's to downgrade its credit ratings on both economies, while Greece's government debt was given "junk" status.

These actions triggered sharp slides on global stock markets, and forced the euro lower against the dollar.

High rates

The eurozone and the IMF have been discussing the terms of a loan package to Greece for a number of weeks.

It is expected to be worth 45bn euros ($59bn; £39bn) in the first year, which it urgently needs in order to refinance its huge public debts.

Clashes between police and protesters outside the finance ministry in Athens

In recent weeks, international investors have shown they are effectively unwilling to lend Greece money.

Greece's cost of borrowing fell slightly on Thursday morning, reflecting a slight improvement in investors' confidence, but interest rates remain prohibitively high.

Damaged reputation

Start Quote

If S&P doesn't create economic reality - which it doesn't - how can its assessment of that economic reality wreak such havoc?”

End Quote Robert Peston BBC business editor

Despite pledging to hammer out a deal, German Chancellor Angela Merkel questioned whether Greece should have been allowed into the eurozone in the first place.

She said the decision "may not have been scrutinised closely enough".

Mr Papantoniou blamed Germany for holding up a rescue deal for Greece, saying "forces within German politics" were seeking to push Greece out of the single currency.

He called the current economic situation in Greece "very dangerous", and blamed Europe's slow response to the crisis so far for "sending confused signals to the market".

"We have lost a lot of time," he said. "The reputation of the eurozone has been hurt [and] the stability of the euro has been impaired.

"But even at this late stage it is important for the eurozone to show its determination and effectiveness in dealing [with the crisis].

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