Eurozone agrees second Greece bailout
Eurozone finance ministers sealed a €130bn bailout for Greece to avert a chaotic default in March after persuading private bondholders to take greater losses and Athens to commit to deep cuts.
After 13 hours of talks, ministers finalised measures to cut Greece’s debt to 120.5 per cent 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 next month.
By agreeing that the European Central Bank would distribute its profits from bond buying and private bondholders would take more losses, the ministers reduced the debt to a point that should secure funding from the International Monetary Fund and help shore up the 17-country currency bloc.
But the austerity measures wrought from Greece are widely unpopular among the population and may hold difficulties for a country which is due to hold an election in April. Further protests could test politicians’ commitment to cuts in wages, pensions and jobs.
Every government in the currency union will also have to approve the package. Northern creditors, such as Germany, had pressed for even tougher measures to be placed on Greece, but Finance Minister Wolfgang Schaeuble said he was very confident a majority in parliament would approve the package.
“We have reached a far-reaching agreement on Greece’s new programme 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.
The euro gained in Asia after the bailout was agreed.
Some economists say there are still questions over whether Greece can pay off even a reduced debt burden.
A return to economic growth could take as much as a decade, a prospect that brought thousands of Greeks onto the streets to protest on Sunday. The cuts will deepen a recession already in its fifth year, hurting government revenues.
“We sowed the wind, now we reap the whirlwind,” said Vassilis Korkidis, head of the Greek Commerce Confederation. “The new bailout is selling us time and hope at a very high price, while it doggedly continues to impose harsh austerity measures that keep us in a long and deep recession.”