Euro officials reach deal over Greece
Tuesday 27 Nov 2012 2:47 p.m.
By Don Melvin and Raf Casert
The 17 European Union nations that use the euro have struck an agreement with the International Monetary Fund on a program to reduce Greek debt and put Athens on the way to get the next instalment of its much-needed bailout loans.
The first disbursement is set to take place Dec. 13, said Jean-Claude Juncker, head of the eurogroup of finance ministers, after Tuesday's decision.
Mario Draghi, President of the European Central Bank, said markets should pay heed. "It will certainly reduce the uncertainty and strengthen confidence in Europe and in Greece."
This was the third time in the last two weeks that finance ministers from the eurozone had tried to hammer out a deal on the next instalment of bailout money - some €44.6 billion.
In Athens, Prime Minister Antonis Samaras welcomed it as a great victory. `'As Greeks, we fought together. And tomorrow a new day begins for all Greeks."
And the EU lauded all Greeks for holding their country back from the brink.
“We strongly believe in the Greek capacity to recover. The Greek people are courageous people. They are willing to bring their country back on the path of growth," Juncker said.
The so-called troika of the European Central Bank, IMF and the European Commission, which is the 27-country EU's executive arm, have twice agreed to bail out Greece, pledging a total of €240 billion in rescue loans - of which the country has received about €150 billion so far. In return for its bailout loans, Greece has had to impose several rounds of austerity measures and submit its economy to scrutiny.
Greece is predicted to enter its sixth year of recession shortly and has a quarter of its workforce out of a job, and there had been fears it might be forced to drop out of the eurozone, destabilizing other countries in the process.
The main aim of the bailout program is to right Greece's economy and get it to a point where it can independently raise money on the debt markets. It has been clear for months that the country is far from achieving that goal. The talks have centred on trying to get Greece back on the path to sustainability by reaching an agreement on how the country's debt load can be reduced.
Juncker said the agreement includes:
- A plan to reduce Greece's debt level to 124 percent of its gross domestic product by 2020 and below 110 percent by 2022. The IMF had originally insisted on a debt-to-GDP ratio of 120 percent by 2020.
- A cut of 100 basis points on the interest rate charged to Greece by other eurozone member states - excluding those that are also receiving bailouts.
- A 15-year extension of the maturities of loans from other countries and the eurozone's bailout fund, the European Financial Stability Facility, and a deferral of interest payments by Greece on EFSF loans by 10 years.
"This is not just about money," Juncker said. "It is the promise of a better future for the Greek people and for the euro area as a whole."
The head of the IMF, Christine Lagarde, also said the agreement was significant.
"We wanted to make sure that Greece was back on track," Lagarde said. "If you put it all together it is a significant amount."
Greece will get €34.4 billion straight away and the rest in separate instalments in January, February and March.
The political agreement reached Tuesday will have to be submitted to parliaments in some countries. After that, the finance ministers plan to hold another meeting, either in person or by telephone, to give final approval to the disbursement.