Greece back from the brink
Source: Agencies |
February 22, 2012, Wednesday
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Print Edition
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The countries that use the euro pulled Greece back from an imminent and potentially catastrophic default yesterday, by finally stitching together a 130 billion euro (US$170 billion) rescue package they hope will also provide a lifeline for their common currency.
But the patchwork of measures - including the implementation of austerity measures in Greece and approval by skeptical German and Dutch parliaments - required to give the rescue even a chance of success means it's unlikely to be the end of the continent's debt crisis.
European markets edged lower, having enjoyed solid gains in the run-up to the meeting on expectations a deal would be secured, while the euro rose 0.2 percent.
The finance ministers from Greece and the other 16 countries that use the euro wrangled until the early hours over the details of the rescue, squeezing last-minute concessions out of private holders of Greek debt.
The eurozone and the International Monetary Fund, which will be providing the money for the new bailout, hope the new program will eventually put Greece back into a position where it can survive without external support and secure its place in the euro currency union.
The accord, which had been months in the making, seeks to reduce Greece's massive debts on all fronts, with both private and official creditors going beyond what they had said was possible in the past.
On top of the new rescue loans, Athens will also ask banks and other investment funds to forgive it some 107 billion euros in debt, while the European Central Bank and national central banks in the eurozone will forgo profits on their holdings.
The deal "closes the door to an uncontrolled default that would be chaos for Greece and Greek people," said European Commission President Jose Manuel Barroso.
But despite those unprecedented efforts, it was clear that Greece, which kicked off Europe's debt crisis two years ago, was at the very best starting on a long and painful road to recovery. At worst, the new program would push the country even deeper into recession and see it default on its debts further down the line.
Christine Lagarde, head of the IMF, said it wasn't an easy program but an ambitious one, adding that there were significant risks Greece's economy would not grow as much as hoped.
Including Greece's first bailout worth 110 billion euros, the new deal means every Greek man, woman and child will owe the eurozone and the IMF about 22,000 euros.
In Athens, reaction was a mixture of relief the country had avoided financial catastrophe and fears for a dark future.
Architect Valia Rokou said: "I don't see (the agreement) with any joy because again we're being burdened with loans, loans, loans, with no end in sight."
Within the next two months, Greece will have to pass a law that gives paying off the debt legal priority over funding government services. In the meantime, Athens has to set up an escrow account that will at all times have enough money to service its debts for three months.
Greek politicians greeted the package as a turning point.
"It's no exaggeration to say that today is a historic day for the Greek economy," said Greek Premier Lucas Papademos.
The deal is expected to bring Greece's debt down to 120.5 percent of gross domestic product by 2020. At present, the debt stands at more than 160 percent of GDP.
But the patchwork of measures - including the implementation of austerity measures in Greece and approval by skeptical German and Dutch parliaments - required to give the rescue even a chance of success means it's unlikely to be the end of the continent's debt crisis.
European markets edged lower, having enjoyed solid gains in the run-up to the meeting on expectations a deal would be secured, while the euro rose 0.2 percent.
The finance ministers from Greece and the other 16 countries that use the euro wrangled until the early hours over the details of the rescue, squeezing last-minute concessions out of private holders of Greek debt.
The eurozone and the International Monetary Fund, which will be providing the money for the new bailout, hope the new program will eventually put Greece back into a position where it can survive without external support and secure its place in the euro currency union.
The accord, which had been months in the making, seeks to reduce Greece's massive debts on all fronts, with both private and official creditors going beyond what they had said was possible in the past.
On top of the new rescue loans, Athens will also ask banks and other investment funds to forgive it some 107 billion euros in debt, while the European Central Bank and national central banks in the eurozone will forgo profits on their holdings.
The deal "closes the door to an uncontrolled default that would be chaos for Greece and Greek people," said European Commission President Jose Manuel Barroso.
But despite those unprecedented efforts, it was clear that Greece, which kicked off Europe's debt crisis two years ago, was at the very best starting on a long and painful road to recovery. At worst, the new program would push the country even deeper into recession and see it default on its debts further down the line.
Christine Lagarde, head of the IMF, said it wasn't an easy program but an ambitious one, adding that there were significant risks Greece's economy would not grow as much as hoped.
Including Greece's first bailout worth 110 billion euros, the new deal means every Greek man, woman and child will owe the eurozone and the IMF about 22,000 euros.
In Athens, reaction was a mixture of relief the country had avoided financial catastrophe and fears for a dark future.
Architect Valia Rokou said: "I don't see (the agreement) with any joy because again we're being burdened with loans, loans, loans, with no end in sight."
Within the next two months, Greece will have to pass a law that gives paying off the debt legal priority over funding government services. In the meantime, Athens has to set up an escrow account that will at all times have enough money to service its debts for three months.
Greek politicians greeted the package as a turning point.
"It's no exaggeration to say that today is a historic day for the Greek economy," said Greek Premier Lucas Papademos.
The deal is expected to bring Greece's debt down to 120.5 percent of gross domestic product by 2020. At present, the debt stands at more than 160 percent of GDP.
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