BRUSSELS—In the early hours of this morning, finance ministers from eurozone countries managed to secure a new bailout deal (237 billion euro) that should keep Greece in the eurozone.
The deal was brokered in Brussels, between governments, the EU, the IMF and private creditors after what was described by some as a ‘marathon session’ which lasted over 13 hours.
The deal will see private holders of Greek debt encuring losses of 53.5 per cent on the nominal value of their bonds.
According to Reuters “the Greek Prime Minister, Lucas Papademos, pronounced himself ‘very happy’ at the massive bailout agreed by eurozone partners and private creditors.”
In a statement today, Eurozone Vice-President, Mr Olli Rehn described the agreement as “an essential step further for Greece and for the euro area as a whole.”
“It is a far reaching and important agreement … which will substantially reduce the debt burden of Greece and will help to reform the economy and administration so as to return to growth and creating jobs,” said Vice-President Rehn who insisted that the programme is supported by “a very substantial contribution by the private sector.”
According to Vice-President Rehn, among the haircut of 53.5 per cent, several other elements of the agreement will reduce the Greek public debt to the level of 120.5 per cent of GDP by 2020. “In order to reach this level and to ensure that the financing of the official sector is limited to 130 billion euro during the programme period, we needed several hours of negotiations, and that was the main task of tonight obviously,” said Vice-President Rehn.
The programme is based on rigorous conditionality which is strengthened by reinforced monitoring of the implementation of the programme through enhanced and permanent presence of the Commission’s task force on the ground, supported by experts provided by Member States. In order to enhance the implementation of the programme, we also decided to create a segregated account through which Greece will pay an amount of the coming quarter’s debt service which will certainly give strength to policy conditionality.
In concluding, Vice-President Rehn said “all in all, today’s deal is a key remaining building block of our comprehensive crisis response and with this agreement we have a real chance to turn the corner and move from stabilisation to boosting sustainable growth and job creation.”
Ms Christine Lagarde, Managing Director of the International Monetary Fund (IMF), issued a statement where she welcomed “the proposed understandings” reached by the Eurogroup to support Greece.
“The success of this strategy crucially depends on full and timely policy implementation by Greece and long-term support by euro area Member States. Recognising the sacrifice involved for the Greek people, the strategy will also aim to minimise the impact on the poorest and most vulnerable,” said Ms Lagarde who also welcomed the discussion on the European Financial Stability Facility (EFSF) and European Stability Mechanism (ESM).
Ms Lagarde said that these initiatives will “help bolster the firewall against financial contagion, catalyse efforts to enhance IMF resources, and help secure global stability for the benefit of all.”