It took a while but Prime Minister Antonis Samaras’ uneasy coalition government got some relief when Eurozone finance ministers – on the third try – finally agreed to a complicated deal that would lead to the release of 43.7 billion euros ($56.48 billion) in long-delayed loans to keep the country’s economy from collapsing. But Greece will have to wait for the money, with a first installment not set until Dec. 13, and as international lenders monitor the economy.
In the first batch, Greece will receive 34.4 billion euros ($44.47 billion )- 23.8 billion euros ($30.76 billion) for recapitalization of banks and the rest to pay bills, wages and pensions – but the remaining 9.3 billion euros ($12.02 billion) will be paid in three installments at the beginning of 2013, as long as Greece sticks to reforms.
The convoluted deal aims at cutting Greece’s debt-to-Gross Domestic Product (GDP) ratio from near 180 percent now to 124 percent by 2020 – not the 120 percent target initially set by the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB.) The ECB will forgo 11 billion euros ($14.21 billion) in profits on its holdings in Greek bonds.
Greek will also get 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, as well as a plan to finance a buyback of its bonds from private investors at what officials said was a target cost of around 35 cents on the euro.
“This is not just about money,” Eurozone chief Jean-Claude Juncker said. “It is the promise of a better future for the Greek people and for the euro area as a whole.” IMF Managing Director Christine Lagarde said, “We wanted to make sure that Greece was back on track.” She said the IMF would wait until a bond buyback scheme to reduce Greek debt has been carried out before deciding to release its share of bailout funding.
“This was a test for the Eurozone and we simply could not afford to fail,” said European Union Economic and Monetary Affairs Commissioner Olli Rehn, who said that further steps to reduce Greek debt would be considered. “This agreement is possible because Greece has shown it is serious about reforms,” he said.
The coming monies are part of a second series of 130 billion euros in loans. Greece was surviving on a first bailout of 109 billion euros that began in 2010 but came with attached austerity measures that have roiled Greek society.
German Finance Minister Wolfgang Schaeuble said further relief could be coming if Greece adheres to tough restrictions that include setting aside money from privatization and projected surpluses for loan repayments. “We will be, if need be, consider further measures for the reduction of total debt,” he said after a 12-hour meeting in Brussels.
Samaras, under fire in his own coalition and facing mounting social unrest because of a new wave of pay cuts, tax hikes and slashed pensions that have worsened the country’s five-year recession, said, “As Greeks, we fought together … a new day begins for all Greeks.”
Samaras’ New Democracy conservatives have fallen behind the major opposition Coalition of the Radical Left (SYRIZA) in recent polls after unrelenting facing protests, strike and riots against the austerity measures that came with the bailouts. SYRIZA lawmaker Dimitris Papadimoulis said though, “It’s a half-baked compromise, a band-aid on the gaping wound of debt.”
(Sources: Kathimerini, AP)