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Eurozone Backs Second Greek Bailout Deal

by Ulrika Lomas,, Brussels

22 February 2012

Following over twelve hours of intense negotiations, eurozone finance ministers gathered in Brussels finally agreed to a second EUR130bn (USD170bn) rescue package for Greece, to enable the country to avoid bankruptcy and to secure its future in the eurozone.

In return for the package, Athens has pledged to reduce its debts from 160% of gross domestic product (GDP) currently to 120.5% by 2020, by implementing a conditional and painful EUR3.3bn savings package and by completing by March 11 a debt write-off with private creditors such as banks and insurance companies, aimed at reducing Greek debt by around EUR107bn – EUR7bn more than initially planned.

Greece has also agreed to accept an enhanced and permanent presence of European Union (EU) monitors in Greece tasked with supervising the government’s economic management and ensuring that Athens complies with its spending agreements. A special account is also to be set up, containing sufficient money to enable the government to fully service its debts.

Ahead of the Brussels meeting, during a recent special sitting, the Greek cabinet of Prime Minister Lucas Papademos adopted a set of bills designed to implement the EUR3.3bn savings package, providing notably for additional cuts in top pensions, for a lowering of the minimum wage, for significant public sector job cuts and for a liberalization of the country’s labour laws.

The government has also agreed to reform the country’s tax system to generate additional fiscal revenues and to open up the markets to generate more economic growth.

Commenting on the outcome of the talks in Brussels, Luxembourg’s Prime Minister and President of the Eurogroup Jean-Claude Juncker underscored that the “far-reaching deal” would lead to a “significant debt reduction for Greece”, and would serve to “guarantee the future of the country in the eurozone”.

The Greek parliament is due to vote on the package on February 22.

TAGS: tax | investment | pensions | fiscal policy | public sector | law | gross domestic product (GDP) | agreements | Greece | European Union (EU) | Europe

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