TIMELINE-The EU’s $1 trillion rescue — how it happened

* EU finance ministers clinch deal to fend off crisis

* Eight days of intense talks produce $1 trillion package

* 11-hour meeting irons out critical financial details

By Luke Baker

BRUSSELS, May 10 (BestGrowthStock) – After 11 hours of hard and at
times heated negotiations, European Union finance ministers
struck a $1 trillion deal in the early hours of Monday that may
have fended off a global debt crisis.

The deal, which creates a 500-billion-euro ($670.9 billion)
loan package backed by up to 250 billion euros from the IMF, is
designed to stop Greece’s debt problems spreading to other euro
zone states. As part of the plan, the European Central Bank has
begun buying sovereign debt on the secondary market.

It appears to be working — the euro has strengthened, world
stock markets are up, and yields on Greek, Spanish, Portuguese
and other debt have fallen sharply. Oil prices have risen. The
euro zone may have fended off its Lehman Brothers moment.

Following is a description — compiled from EU officials,
diplomats and other sources — of how the deal appears to have
come together over the past eight days, since finance ministers
from the 16 euro zone countries met in Brussels on Sunday May 2
to secure a 110-billion-euro financial aid package for Greece.


That Sunday, ministers hoped the Greek bailout announcement,
after nearly five months of turmoil and growing civil unrest,
would be enough to calm financial markets. Euro zone heads of
state, whose approval was needed for the bailout, would meet in
Brussels on Friday, May 7, to ink the deal, they said.

But they were overly optimistic. Financial markets were
sceptical that the Greek aid package would be sufficient to
stave off further contagion and by the afternoon of May 3 it was
clear that further rescue measures would be necessary.

In the days ahead, extreme market fluctuations piled
pressure on the euro zone leaders before their May 7 meeting.
Some European commercial banks were reporting difficulties in
raising funds in U.S. markets because of the fears that Europe’s
debt crisis would affect the entire banking sector.

Leaders were therefore expected to come up with a “big
figure” bail-out or similar sort of financial mechanism to show
skittish investors that they held the initiative in the crisis.

Their meeting was scheduled for 7 p.m., but French President
Nicolas Sarkozy arrived about three hours early. In that time he
held bilateral meetings with most of his euro zone counterparts,
rallying them towards a deal, EU sources say.

By the time German Chancellor Angela Merkel, whose backing
is essential for any euro zone deal but who was the most
reluctant to approve a bailout, arrived just before 6 p.m.,
Sarkozy was ready to present her with a “fait accompli”.

“When she was told, she looked like a boxer who had been
punched in the chest,” said one European source who followed the
developments closely.

The same day, U.S. President Barack Obama had spoken to
Merkel, underlining how important it was for global financial
market stability that the euro zone reach a deal, not only to
help Greece but to stave off the threat of wider contagion.


The 16 euro zone heads of state, European Commission
President Jose Manuel Barroso, EU President Herman Van Rompuy
and European Central Bank Governor Jean-Claude Trichet held
talks for about four hours over dinner.

Diplomats say they agreed they should announce an
overwhelming package of support for the euro area, but they
could not agree on whether it should be open-ended or a limit
should be put on it. Germany wanted a 500 billion euro limit.

There was also disagreement about the structure of the
mechanism, about whether it should involve loans between euro
zone member states or loan guarantees, and what role the
European Commission’s balance of payments fund, used to provide
financial support to non-euro-zone member states, should play.

The ECB was also adamant its independence should not be
compromised by any plan that might involve it being called on to
buy member states’ debt on the open market. It did not want to
employ what it saw as being the “nuclear option”.

In the end, Barroso announced they had agreed a “financial
mechanism” to support the euro zone, but gave few details.

Sarkozy described a “mega-package”, and said steps should be
taken to quell speculation in the financial markets, but again
the details were few and far between. Barroso said EU finance
ministers would together agree the details on Sunday.


The meeting of the EU’s finance ministers — each with an
adviser and their country’s EU ambassador in tow — was
scheduled to begin at 3 p.m., with a news conference pencilled
in for 6 p.m. The details would be worked out quickly.

But it soon became clear that it was not just a case of
signing the deal — the details still needed pinning down too.
There were also unexpected other obstacles to negotiate.

Germany’s finance minister, Wolfgang Schauble, was taken ill
shortly after arriving in Brussels. Schauble, who was shot and
nearly killed by a mentally ill man 20 years ago and uses a
wheelchair, had reacted badly to some medication.

As he was taken to hospital, Germany needed to fly in a
replacement from Berlin, delaying the start of talks.

Once negotiations began in earnest, they focused on the
disagreement over loan guarantees or loans. Germany said it
should be loans, with loan guarantees too fluid and unbinding.
There was also a dispute over the ECB’s role.

Diplomatic sources say the meeting occasionally became
heated. One finance minister was reported to have shouted so
loudly in anger over the ECB’s reticence to take part in the
rescue plan that he lost the crown of a tooth.

One person who was in the room for part of the time
described tense scenes, with groups of ministers and their
delegations huddled in corners and agitated. Senior finance
ministers repeatedly left the room to take part in G7 and G20
conference calls to discuss the bail out.

Asian finance ministers were said to be alarmed about the
prospect for continued uncertainty and fallout, with their
financial markets opening shortly after midnight in Europe.
Obama and Merkel spoke again about the severity of the crisis.


It is not clear what finally brought the ECB on board.

On Thursday, May 6, at an ECB governing council press
conference in Lisbon, Trichet was asked if the bank would
consider intervening in the market to buy government bonds.

“I would say we did not discuss this option,” he said. But
three days later the bank had apparently decided otherwise.

Diplomats say the ECB only wanted to make sure that its
duty-bound independence was adamantly put down for the record,
but it also made clear that it was willing, within reason, to
join whatever financial mechanism the ministers agreed on as
long as there was strict budget deficit conditionality.

“From the beginning, there was a really strong consensus
that a deal would be struck, it was just a matter of time,” said
one person involved in the talks. “Everybody realised that
history was at their backs. They were going to reach a deal, but
it just took time to take everything into consideration.”

In the end it took 11 hours. By just after 2 a.m. on Monday,
word was emerging of the deal that had been struck.

Penny Stocks

(Reporting by Luke Baker, Ilona Wissenbach, Julien Toyer,
David Brunnstrom and Justyna Pawlak in Brussels; Paul Taylor in
Paris and Krista Hughes in Basel; writing by Luke Baker; editing
by Timothy Heritage/Janet McBride)

TIMELINE-The EU’s $1 trillion rescue — how it happened