Eurozone leaders agree on Franco-German bail-out mechanism

France and Germany have brokered an emergency financing mechanism to help Greece, following extensive bilateral negotiations between the two sides earlier on Thursday (25 March).

Under the deal, approved by eurozone leaders after late evening talks, a funding package will be created, made up of voluntary contributions from euro area countries and cash from the International Monetary Fund.

With the document dominated by German thinking, France is claiming a reduced IMF role as its negotiating victory.

“As part of a package involving substantial International Monetary Fund financing and a majority of European financing, euro area member states are ready to contribute to co-ordinated bilateral loans,” says an earlier Franco-German text.

Diplomats suggested the pot for Greece could total €22 billion, with Athens reportedly welcoming the deal.

However, the mechanism is theoretically open to all 16 euro area states, not just Greece, with any disbursements requiring further unanimous eurozone approval. In addition, payouts will be subject to “strong conditionality and based on an assessment by the European Commission and the European Central Bank.”

Echoing earlier demands made by Germany Chancellor Angela Merkel, the one-page document says the mechanism must be considered as a last resort, a bid to help the German leader persuade her citizens ahead of crucial regional elections that support for Greece is also in their interest.