Brussels: The eurozone and IMF threw a new lifeline to Greece yesterday, releasing funds to avert bankruptcy and admitting that help to reduce debt will be needed for years, leading the Greek prime minister to herald a new dawn for his country. The deal struck in the early hours marks a "new day" for Greece, Prime Minister Antonis Samaras said after 13 hours of landmark negotiations in Brussels. On financial markets, the euro firmed and shares rose in relief at the new breathing space for Greece.
This came in the form of approval for the latest slice of rescue funding to pay current bills, already agreed but tied to a new round of deep budget measures, and a new look at the huge mountain of accumulated debt, with the IMF giving ground. "Everything has gone well," Samaras said in a message to the Greek people who have been reeling from the devastating effects of their debt crisis, recession, and the effort needed to restructure their economy.
"All Greeks have fought (for this decision) and tomorrow is a new day for every Greek person."
European Central Bank President Mario Draghi said that Greece must still meet a series of agreed conditions but "the decision will certainly reduce the uncertainty and strengthen confidence in Europe and in Greece." Eurozone finance ministers agreed in principle to transfer, in December, 43.7 billion euros ($57 billion) so that the country does not default at around the end of the year.
They also adopted a new arrangement with the International Monetary Fund, a party to eurozone bailout packages, to slice more than 40 billion euros by 2020 from the debt owed by Greece. German Finance Minister Wolfgang Schaeuble said the package would be presented to German lawmakers by the end of the week.
The techniques to reduce Greece's debt will begin with a buyback by Greece of old debt that has fallen in value on commercial money markets. National central banks across the eurozone will forego profits on holdings of Greek debt which has slumped in value. Interest rates due to eurozone creditors will also be trimmed or deferred Ireland and Portugal can now be expected to demand parity while maturity dates will be pushed back by years.
The IMF is pushing for a so-called "haircut" or write-down of debt by eurozone partner governments in the way banks wrote off most of the loans due to them earlier this year, but Germany is against this ahead of a general election next year. But other Triple A-rated states have said they would "not exclude" the possibility of a write-down of debt from 2015 onwards.