The euro zone off again Greek Fire
Tuesday, February 21st, 2012At the brink, the euro area has again died Tuesday morning at the fire that threatened to bring Greece but the road is still long and bumpy before the country only emerges from two years of an unprecedented crisis.
Under the terms of the agreement reached shortly before 4:00 Tuesday and after thirteen hours of negotiations, the Greek debt will be reduced to 120.5% of GDP by 2020 through a new public loan program of 130 billion euros and a restructuring of debt held by private creditors.
They have finally agreed to a 53.5% discount on their obligations through a share swap that will erase more than 100 billion Greek debt.
The European Central Bank and national central banks in the euro area also participate in the plan by giving up some profits on Greek bonds they hold.
"We have reached an agreement on a new scale for Greece and a private sector that will lead to a significant reduction of the Greek debt (…) to ensure the future of Greece in the euro area, "said President of the Eurogroup, Jean-Claude Juncker, after the meeting.
The euro jumped by about half a cent against the dollar after the announcement of this agreement by Reuters.
ATHENS UNDER SURVEILLANCE
The restructuring of the Greek debt held by private creditors will commit this week, said Greek finance minister, Evangelos Venizelos.
It is expected to close in early March, when the Greek authorities should also have implemented a list of priority measures in the program if they want to get the first disbursement.
These public funds are needed to Athens could repay 14.5 billion euros of bonds maturing on March 20.
Troika EU-IMF-ECB, which oversees the implementation of reforms and conducts quarterly reports will be further strengthened and its resources increased.
Under the second bailout, the European Commission will soon send dozens of permanent inspectors in Athens to ensure the smooth running of the technical program and monitor the implementation .
This presence on Greek soil will be accompanied by the creation of a special account to process a priority debt repayments Greek, whose principle is enshrined in the constitution within two months.
NO MIRACLE CURE
This agreement multistage was made necessary by the state of Greek public finances as they appeared in a confidential report prepared by the EU, the Central Europe ; enemies and the International Monetary Fund and obtained by Reuters.
The document also shows that in case of slippage in reforms introduced in Athens or in terms of economy, Greece's debt could reach 160% in 2020, about his current level.
The new aid package will not be a miracle cure. The Greek economy shrank by 7% annual rate in the last quarter of 2011, more than expected, and the new austerity measures would further exacerbate the situation.
Diplomats and economists do not expect this new bailout plan that solves all economic problems overnight, Greek and many believe it will take at least ten years or more for fulfill this task.