European Union Agrees to Help Greece Access EU Development Funds

June 23: Portugal's Prime Minister Pedro Passos Coelho, left, shakes hands with European Commission President Jose Manuel Barroso at EU headquarters in Brussels.

June 23: Portugal's Prime Minister Pedro Passos Coelho, left, shakes hands with European Commission President Jose Manuel Barroso at EU headquarters in Brussels.  (AP)

BRUSSELS -- The European Union said it would help Greece access billions of euros in EU development funds in an attempt to boost the country's struggling economy and sweeten unpopular austerity measures ahead of a tight parliamentary vote.

European Commission President Jose Manuel Barroso said Thursday that the EU was prepared to reduce the amount of money Greece has to come up with to co-fund projects under its regional funds to 15 percent, from the usual 50 percent.

The Commission, which manages the funds, and other EU member states will also set up a program of technical assistance to make sure debt-laden Greece uses the money to stimulate economic growth and create new jobs.

The EU funds are designed to help underdeveloped regions catch up with richer parts of the 27-nation bloc. About euro15 billion ($22 billion) is still available for Greece until 2013, but the country has been struggling to prove it can use the funds well and come up with matching financing.

EU leaders hope that the prospect of some EU funds -- which, in contrast to the rescue loans Greece has been receiving for the past year, do not have to be repaid -- will offer some hope to Greek citizens who have been suffering through a steep economic recession and unemployment above 16 percent.

The Greek debt crisis, which has already spilled over into Ireland and Portugal and threatens to take a larger toll on the 17-country eurozone, has reached a new boiling point in recent weeks. Barely one year after first being granted euro110 billion in rescue loans from other eurozone countries and the International Monetary Fund, it has become clear that Greece will need tens of billions more to avoid defaulting on its massive debts in the coming years.

But eurozone governments have blocked a final deal on a new aid package -- as well as the payment of a crucial euro12 billion installment of the existing bailout -- until the Greek parliament passes euro28 billion in additional spending cuts, tax increases, economic reforms and public asset sales. The new measures, which will allow Greece to meet the deficit targets set out in its bailout program, have sparked sometimes violent protests and been strictly opposed by the conservative opposition party.

In their statement Thursday night, the leaders said the comprehensive package of reforms "must be finalized as a matter of urgency in the coming days" for the new funds to be disbursed. Earlier in the day, they also piled pressure on Greek opposition leader Antonis Samaras, who was in Brussels for a meeting of European conservatives, to back the new measures.

"We call on the opposition to fulfill its historical responsibility," German Chancellor Angela Merkel said as she arrived at the summit. Samaras' conservative party had been in power for years before Socialist Prime Minister George Papandreou took over in late 2009 and discovered that Greece's deficits were much bigger than previously disclosed.

But in their final statement, the leaders also made a stronger commitment to a second aid package for Greece, saying the promised austerity measures "will provide the basis for setting up the main parameters of a new program jointly supported by its euro area partners and the IMF."

The leaders decided that the European Commission's bailout fund, the European Financial Stability Mechanism, won't be part of the new Greek bailout, EU President Herman Van Rompuy said. That's a win for British Prime Minister David Cameron, who had strictly opposed using the euro60 billion EFSM, which is backed by the EU budget.

On his way out of the summit, Greek Prime Minister George Papandreou said "very important decisions" had been made at Thursday's meeting. "We got the support of our partners. This is not only a green light but a positive sign for the future of Greece," he said. "I believe we are on a stable on a stable course. It is a difficult course for Greece."

The leaders put off another decision originally slated for Thursday's talks. The formal appointment of Mario Draghi as the next president of the European Central Bank won't be debated until Friday, Van Rompuy said. However, others implied that even on Friday no agreement will be found on Draghi, as fellow Italian executive board member Lorenzo Bini Smaghi has so far refused to leave his post.

The French, who with the departure of current ECB President Jean-Claude Trichet on Oct. 31 would not have a representative on the board, will only support Draghi if a Frenchman or woman takes over Smaghi's spot.

"I do know that French expectations concern the succession of Mr. Draghi," said Luxembourg Prime Minister Jean-Claude Juncker. "The rule is that the members of the governing council are appointed for eight years and it is up to them to decide" when to leave.