Eurozone finance ministers put together a package of debt relief, freeing 43.7 billion in loans for Greece.
By Andy Dabilis for Southeast European Times in Athens -- 28/11/12
A man reads a newspaper in Syntagma Square in Athens on Tuesday (November 27th). The eurozone and IMF agreed on a redrawn rescue to avert bankruptcy and to cut the Greece's debt. [AFP]
Officials and analysts showed cautious optimism after eurozone finance ministers struck a deal that would free up 43.7 billion euros in loans for debt-crunched Greece -- although no money will be paid out until December 13th, and then only if the government sticks to a complicated reform deal.
Greece will receive 34.4 billion euros in the first installment -- 23.8 billion for recapitalisation of banks and the rest to pay bills, wages and pensions -- but the remaining 9.3 billion will be paid in three installments at the beginning of 2013 as lenders monitor the economy.
The complicated agreement reached on Tuesday (November 27th) is designed to reduce Greece's staggering 330 billion euro debt by 40 billion euros. The package of measures aims to cut the debt to 124 percent of GDP by 2020, not the 120 percent target that the EU-IMF-ECB Troika insisted on originally.
The Troika, fearing an impact on the eurozone if Greece failed, also reduced the interest rates the country will pay. Other elements include a 15-year extension of the maturities of loans from other countries and the eurozone's bailout fund, and a deferral of interest payments by 10 years.
"We had to have a solution …. [but] there are some black spots … other countries have to explain why they are borrowing at 4 percent but need to give money to Greece for 1 percent," Aggelos Tsakanikas, head of research for the Athens-based Foundation for Economic and Industrial Research, told SETimes.
Prime Minister Antonis Samaras said of the agreement: "As Greeks, we fought together … a new day begins for all Greeks."
The major opposition Coalition of the Radical Left (SYRIZA) dismissed the deal as a temporary solution.
"It's a half-baked compromise, a Band-aid on the gaping wound of debt," SYRIZA lawmaker Dimitris Papadimoulis said.
The ECB is set to give up 11 billion euros of profits on its holdings of Greek bonds, and the parliaments of the other 16 countries in the eurozone must also sign off on the deal. ECB President Mario Draghi said the agreement should end speculation that Greece could be forced out of the eurozone.
"This is a clear victory for the government because the Troika promised to give even more money than initially promised," Antonis Klapsis, head of research for the party's think tank, the Konstandinos Karamanlis Institute for Democracy, told SETimes.
Klapsis cautioned though that, "This is the beginning of a difficult road and not the end but it's better to walk on the road together so you don't die of thirst or hunger. If they had failed to reach a decision it would have had a huge impact on the global economy."
Haralambos Tsardanidis, who operates the Institute for International Economic Relations in Athens, said that the deal brought some relief. But, he cautioned, "It's all based on the sustainability of the Greek debt and we don't know if Greece will be able to implement the program during a recession and with social reaction, and can follow the strict rules."