After talks that lasted through the night, eurozone finance ministers finally struck a $172 billion bailout agreement for Greece early Tuesday. The deal averts a debt default by Athens, but also demands Greeks to shoulder more austerity measures.
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After 13 hours of negotiations, Luxembourg Prime Minister Jean-Claude Juncker announced success at a news conference early Tuesday in Brussels.
"We have reached a far-reaching agreement on Greece's new program and private-sector involvement that will lead to a very significant debt reduction for Greece and pave the way toward an unprecedented new amount of official financing being provided by the EFSF [the EU's bailout fund] to secure Greece's future in the euro area," said Juncker.
New Greek Austerity Measures
Greece's government has approved several rounds of austerity measures in hope of securing a new eurozone bailout. Some of the measures still require further legislation in Greece:
- Pass a budget including spending cuts equal to 1.5% of the gross domestic product, or $4.37 billion.
- Reduce the minimum wage by 22%; by 32% for those under the age of 25.
- Reduce the state work force by 15,000 within one year.
- Hire only one new civil servant for every five who retire.
The deal gives Greece its long-awaited installment of bailout money, allowing it to make debt repayments due on March 20. More broadly, it averts a larger crisis sweeping through the 17-nation currency zone if Greece leaves it.
The agreement would see Greece slice its debt to about 120 percent of its gross domestic product by 2020 - compared to 160 percent today. Private investors would take greater losses than anticipated of 53.5 percent of the face value of their bonds. And, Greeks, who have been out protesting months of belt-tightening measures, will face more government spending cuts.
Still, officials like International Monetary Fund chief Christine Lagarde, praise the agreement for turning the Greek economy around in the long haul.
"The combination of this significant effort plus the ambitious program with a clear focus on competitiveness should really give enough space for Greece to restore its competitiveness to improve its debt sustainability, and to demonstrate that with good and solid and rigorous implementation checked on a regular basis by the various partners associated with the program, it can get back on track," said Lagarde.
Lagarde says the IMF will discuss the Greek package during the second week of March.
Eurozone ministers also discussed a new, larger and permanent bailout fund, aimed at strengthening the firewall around countries that get into financial trouble. Juncker says European heads of state would likely take up the issue when they meet in early March.