Eurozone approves bailout for Greece

Eurozone approves bailout for Greece

By: || Updated: 01 Jan 1970 12:00 AM


Brussels:
Eurozone finance ministers have reached an agreement on a second bailout
for Greece worth 130 billion euros (172 billion dollars), diplomats in
Brussels said early Tuesday after more than 12 hours of negotiations.





After more than 12 hours of talks, the countries that use to euro reached
an agreement early Tuesday to hand Greece 130 billion euros ($170 billion)
in extra bailout loans to save it from a potentially disastrous default
next month, an European Union diplomat said.

The euro surged as
the news broke, climbing 0.7 percent to $1.328 within minutes. While much
depended on the details of the deal, a final agreement on the bailout for
Greece will take some pressure off the 17-country currency union, which
has been battling a serious debt crisis for two years.

The deal
details of which were still being worked out by European finance ministers
in an all-night session in Brussels was expected to bring Greece’s debt
down to 120.5 percent of gross domestic product by 2020, according to the
official. That’s around the maximum that the International Monetary Fund
and the euro-zone considered sustainable.

The diplomat spoke on
condition of anonymity because a formal announcement was pending. The
country needs the 130 billion ($170 billion) bailout so it can move ahead
with a related 100 billion ($130 billion) debt relief deal with private
investors. That deal needs to be in place quickly if Athens is to avoid a
disorderly default on a bond repayment on March 20.

Last week, a
new report from Greece’s debt inspectors indicated that the country’s
debt would still be close to 129 percent of GDP by the end of the decade,
despite massive new spending cuts planned by Athens and a tentative 100
billion debt relief deal with private investors.

That level would
have prevented the IMF and some euro countries from putting up more rescue
money on top of a 110 billion bailout Greece received in 2010. Moving in
and out of talks with bondholder representatives and consultations among
themselves, the IMF and the European Central Bank, the ministers pushed
private investors to accept steeper losses, going beyond a 50 percent cut
in the face value of their bonds.

It was unclear what the final
deal with bondholder representatives looked like, but the lower debt level
suggested that they compromised further. The big question will now be how
many banks and other investment funds will actually agree to participated
voluntarily and whether Greece will have to force some holdouts to sign up
to make the deal effective.




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