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Kenya stands to gain as European leaders struck deal to bail out debt ridden Greece

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By Ben Kinyanjui and agencies

Kenya is one of the countries in Africa that is likely to benefit from Wednesday’s bailout plan seeking to resolve the two year old Eurozone debt crisis.Kenya is a major exporter of flowers to EuropeKenya is a major exporter of flowers to Europe

European leaders and bankers meeting in Brussels struck a last-minute, "three-pronged" deal overnight Wednesday on solving the debt crisis that has partly contributed to the sharp depreciation of currencies in East Africa.

 

Central Bank of Kenya Governor Prof Njuguna Ndung’u has persistently blamed the debt crisis for the dwindling economic fortunes and the weakening shilling that is trading at Sh100 for the US dollar down from Sh85 early in the year.

“A variety of the indicators for the global economy reviewed by the Monetary Policy Committee were being affected by international events in both the Euro Zone and the United States,” said Prof Ndung’u in July.

“In particular, there were significant financial sector driven concerns in these countries which resulted in instability in the Euro and US dollar respectively.”

Kenya also exports most of its agricultural commodities including tea, coffee, flowers, fruits and vegetables to Europe and a debt free zone would boost export volumes that would translate into higher foreign exchange and a stronger shilling.

The International Monetary fund (IMF) also welcomed the move by the leaders with managing director Ms Christine Lagarde, saying the fund would continue to support the efforts.

“I welcome the steps taken today by the Eurozone leaders toward establishing a comprehensive framework to address the crisis facing the region, and I am encouraged by the substantial progress made on a number of fronts,” Ms Lagarde said in a statement.

“More immediately, I intend to recommend approval to the IMF's Executive Board of disbursement of the next tranche of our loan under the current program. The continued commitment of the Greek authorities to implement agreed economic reforms remain, of course, paramount”

The deal means that privately owned banks will accept a 50 percent loss on their Greek bond holdings, while Europe's main bailout fund will be bolstered to 1 trillion euros ($1.4 trillion).

The framework for the new European financial stability facility fund is to be put in place in November.

The BBC reported that banks will also be obliged to raise more capital to protect themselves against any future Government defaults

At a news conference Thursday morning after eight hours of talks, French President Nicolas Sarkozy said the deal "represents an effort of 100 billion euros ($150 billion)".

"Because of the complexity of the issues at stake, it took us a full night. But the results will be a source of huge relief worldwide said Sarkozy told reporters after the meeting.

"We have reached an agreement, which I believe lets us give a credible and ambitious and overall response to the Greek crisis".

French Finance Minister Francois Baron told French radio RTL that the deal had saved the single currency from collapse, calling it “an ambitious, comprehensive and credible response”.

"That's what's going to resolve this business (the debt crisis), that's what will get us out of this zone of turbulence, that's what will allow the economic rebound, that's what will stabilize the euro zone and world growth."

But he added that more needed to be done ahead of next week's G20 summit in Cannes to stop the developed world from falling into recession.

The BBC says that the deal means EU leaders have bought themselves “some time”, and that markets may give them the benefit of the doubt for perhaps a few weeks.

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