Euro zone finance ministers sealed a second bailout for debt-laden Greece on Tuesday that will resolve its immediate financing needs but seems unlikely to revive the nation’s shattered economy.
After 13 hours of talks, euro zone officials said ministers had finalized measures to cut Greece’s debt to 120.5 per cent of gross domestic product by 2020, air yeezy 2012 a fraction above their original target of 120, after negotiators for private bondholders accepted bigger losses to help plug the funding gap.
Agreement on the €130-billion ($172-billion) rescue package, subject to strict conditions, will help draw a line under months of uncertainty that has shaken the currency bloc, and avert an imminent Greek bankruptcy.
“We have reached a far reaching agreement on Greece’s new program and private sector involvement that would lead to a significant debt reduction for Greece and pave the way towards an unprecedented amount of new official financing ... to secure Greece’s future in the euro area,” Luxembourg’s Jean-Claude Juncker, who chairs the Eurogroup of finance ministers, told a news conference.
The euro jumped almost half a cent, air yeezy reversing earlier losses, after reports that a deal had been struck.
A report prepared by experts from the European Union, European Central Bank and International Monetary Fund said Greece needed extra relief to cut its debts near to the official debt target given the ever-worsening state of its economy.
If Athens did not follow through on economic reforms and savings, its debt could hit 160 per cent by that date, said the report, obtained by Reuters.
“Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it,” the nine-page confidential report said, highlighting the fact that Greece’s problems were far from over.
The accord will enable Athens to launch a bond swap with private investors to help reduce and restructure its vast debts, put it on a more stable financial footing and keep it inside the 17-country euro zone.
Around €100-billion of debt will be written off as banks and insurers swap bonds they hold for longer-dated securities that pay a lower coupon,nike air yeezy although it is not clear how many will take the deal.
Private sector holders of Greek debt will take losses of 53.5 per cent on the nominal value of their bonds. They had earlier agreed to a 50 per cent nominal writedown, which equated to around a 70 per cent loss on the net present value of the debt.
“Given the balanced agreement reached with the creditor group ... and the fact that the package delivers debt sustainability for Greece we expect a high participation rate,” Mr. Juncker said.
The debt sustainability report delivered to ministers last week showed that without further measures Greek debt would only fall to 129 per cent by 2020.
The IMF had said if the ratio was not cut to near 120 per cent, it may not have been able to help finance the bailout, putting the whole scheme in jeopardy.
To help fill the financing gap, euro zone central banks will also play their part.
A Eurogroup statement said the ECB would pass up profits it has made from buying Greek bonds over the past two years under its emergency bond-buying program to national central banks for their governments to pass on to Athens “to further improve the sustainability of Greece’s public debt”.
The ECB has spent about €38-billion on Greek government debt that is now worth about €50-billion.