Tue Apr 13th, 2010 at 04:53:27 AM EST
Here's one version, from NRC Handelsblad, of how a deal was (maybe?) reached on lower-than-market-rate loans for Greece. As Germany, flanked by the Netherlands and Austria, continued to insist that Greece should pay market rates (up to 7% and possibly rising) for any loans from European partners, the phone began heating up between European capitals:
nrc.nl - International - Europe - EU bails out Greece after final push from markets
Between phone calls, the French and Italian presidents met face to face. They worked out a deal with ECB chairman Jean-Claude Trichet that would entail Greece paying around 5 percent interest over bilateral loans from all other European countries. This is higher than the rate the ‘super strict’ IMF usually charges, but far less than the interest Greece was paying by the end of last week. Sarkozy and Berlusconi did not want to wait any longer for the Germans who, they feared, wouldn’t start showing some leniency until May, after the German regional elections, which chancellor Angela Merkel intends to win. Merkel also objected to the 16 eurozone countries taking a decision, and kept insisting all 27 EU member states got involved. The French and Italians reportedly agreed that they could be first to offer Greece loans, granting Merkel some more time. Merkel thus lost the initiative she had held in the Greek bail-out debate for months. It wasn’t until Sarkozy, Berlusconi and Trichet sealed their secret deal on Thursday night that she understood the gig was up, and she dropped her demand for a 6 percent interest rate. To offer Merkel a graceful exit, Juncker talked down the importance of the 5 percent interest rate on Sunday, calling it “anything but a subsidy”. After all, there are a lot of Greek state bonds sitting in German banks.
The effect on Greek difficulties is moot. But the effect on Merkel's political cred in her own country? Apparently disastrous.