London/Berlin: Germany is prepared to give Greece loans at below-market interest rates, dropping its opposition to aid subsidies in a compromise over the terms of a lifeline for the debt-stricken nation, a European government official said.
The loans would be priced above the rate charged by the International Monetary Fund (IMF), which would also participate in an EU-led rescue, said the person, who spoke on condition of anonymity.
Such an arrangement would satisfy German demands that Greece shouldn't be given subsidised loans, the person said. EU finance ministers may agree to the formula for calculating the loans on a teleconference today, the person said.
German resistance to subsidising loans threatened to hold up efforts to set terms on a rescue package for Greece.
Non-concessional rates
With German Chancellor Angela Merkel balking at the use of taxpayers' funds, her government has said that the EU should stick to a March 25 agreement that credit to Greece should be at "non-concessional" rates.
Under the terms of the accord, Europe would provide more than half the loans and the IMF the rest, which would be triggered if Greece runs out of fund-raising options.
UBS AG economists estimate Greece will need to seek emergency funding to make bond payments and cover debt refinancing of more than 20 billion euros (Dh99.1 billion) in the next two months.
The yield on Greek 10-year bonds surged 60 basis points this past week, driving it to a record 7.364 per cent on April 8. Any IMF loans to Greece may cost around 3.26 per cent.
