Greece has secured its crucial 230 billion euro bailout after a marathon session of talks that dragged into the early morning in Brussels, drawing a line under months of uncertainty about the deal.
The Greek government agreed to reduce national debt to nearly 121 per cent of GDP by 2020 in exchange for the 130 billion euro ($161 billion) rescue fund.
The European Commission and the troika made up of the European Union, the European Central Bank and the International Monetary Fund will closely monitor government budget decisions as a condition of the deal.
And private creditors are expected to take losses of 53.5 per cent or more on the value of their bonds in a swap that will reduce Greece's debts by around 100 billion euros ($124 billion).
They had previously agreed to a 50 per cent writedown.
Speaking after 13 hours of talks between Eurogroup members (eurozone finance ministers), the IMF and private creditors, Eurogroup chairman Jean-Claude Juncker said the deal would "secure Greece's future in the eurozone".
"We have reached a far-reaching agreement on a new Greek program and private-sector involvement that will lead to a very significant debt reduction for Greece and pave the way towards a very significant amount of official financing from the European Financial Stability Facility," Mr Juncker, Luxembourg's prime minister, said.
Mr Juncker also said that in the next two months the Greek government would introduce a new law prioritising debt repayments.
Breaking down Greece's bailout
"The [European] Commission will reinforce the taskforce for Greece, in particular on the ground in Athens, in order to ensure that Greece has the institutional means to carry out the new program successfully," Mr Juncker said.
- A writedown of privately-held government debt worth 100 billion euros
- Sweeteners for Greek banks including guarantees in case private creditors do not take up the bond-swap offer in sufficient numbers
- Loans eventually adding up to another 130 billion euros
"The troika will also substantially reinforce its presence in Athens in order to be able to kill in the act any slippage."
The euro jumped in Tokyo trade on news the deal had finally been sealed.
The IMF had said it could not help finance the bailout if Greek debt was not cut to 120 per cent of GDP.
European Central Bank chief Mario Draghi welcomed the accord.
"It is a very good agreement and I welcome the commitments of the Greek government to restoring growth and stability," Mr Draghi said.
But he said implementation of the agreement must be "rightly monitored" - several eurozone nations have called for a near-permanent team of officials to supervise the Greek government.
Will this save the international Economy from collapse?
Edited by Goose, 21 February 2012 - 03:02 AM.