Europe seals new Greek bailout at last

Europe seals new Greek bailout at last

Reuters | February 21, 2012 23:40
By Agencies

Luxembourg Prime Minister and Eurogroup President Jean-Claude Juncker scratches his eyes during a press conference following a eurozone meeting Tuesday at the EU Headquarters in Brussels. Photo: IC

Eurozone finance ministers sealed a 130-billion-euro ($172 billion) bailout for Greece Tuesday to avert a chaotic default next month after forcing Athens to commit to unpopular cuts and private bondholders to accept deeper losses.

The agreement was hailed as a step forward for Greece, but doubts immediately emerged as to whether it would do much more than deal with its most pressing debt problems.

Greece will need more help if it is to bring its debts down to the level envisaged in the bailout and will remain "accident prone" in coming years, according to a deeply pessimistic report by international experts obtained by Reuters.

After 13 hours of talks, ministers finalized measures to cut Greece's debt to 120.5 percent of gross domestic product by 2020, a fraction above the target, to secure its second rescue in less than two years and meet a bond repayment in March.

By agreeing that the European Central Bank would distribute its profits from bond buying and private bondholders would take more losses, the ministers reduced Greece's debt to a point that should secure funding from the International Monetary Fund and help shore up the 17-country currency bloc.

The austerity measures wrought from Greece are widely disliked among the population and may present difficulties for a country which is due to hold an election in April.

Further street unrest could test politicians' commitment to cuts in wages, pensions and jobs. Greece's two biggest labor unions called a protest in Athens today.

An opinion poll taken just before the Brussels deal showed that support for the two Greek parties backing the rescue package had fallen to an all-time low while anti-bailout parties showed gains.

Anastasis Chrisopoulos, a 31-year-old Athens taxi driver, saw no reason to cheer the deal. "So what?" he asked. "Things will only get worse. We have reached a point where we're trying to figure out how to survive just the next day, let alone the next 10 days, the next month, the next year."

Parliaments in three countries that have been most critical of Greece's second bailout - Germany, the Netherlands and Finland - must now approve the package. German Finance Minister Wolfgang Schaeuble, who caused an outcry by suggesting that Greece was a "bottomless pit," said he was confident it would be passed.

"We have reached a far-reaching agreement on Greece's new program and private sector involvement that would lead to a significant debt reduction for Greece ... to secure Greece's future in the euro area," Jean-Claude Juncker, who chairs the Eurogroup of finance ministers, told a news conference.

Some economists say there are still questions over whether Greece can pay off even a reduced debt burden, suggesting the deal may only delay a deeper default by a few months.

Swedish Finance Minister Anders Borg said, "What's been done is a meaningful step forward. Of course, the Greeks remain stuck in their tragedy; this is a new act in a long drama."

Reuters

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