40 bn bailout eases Greek borrowing costs

Greeces borrowing costs dipped on Monday in positive early market reaction after eurozone countries filled in key details of a financial backstop aimed at quelling fears the heavily indebted country could default.

On Sunday,eurozone governments said they would make euro30 billion 40 billion in loans available to Greece this year if Athens asks for the money,while the International Monetary Fund would contribute about another euro10 billion. The finance ministers of the 16 eurozone nations also agreed on a three-year financing formula that would mean a fixed interest rate of around 5 per cent, while the variable rate would be around 4 per cent,officials said.

The rate is still above what IMF aid recipients usually pay. But it is less than markets had been demanding in recent days.

But the downward trend in Greek borrowing costs as markets opened Monday will lead to relief in Athens,which has said it cannot go on paying the even higher interest rates demanded by jittery bond investors to loan the country money.

The hope is that the mere fact the loans are available will calm markets. That would let Greece borrow normally at acceptable interest rates by selling bonds.