Source: Greece to get $170B bailout, reduce debt

BRUSSELS (AP) — After more than 12 hours of talks, the countries that use the euro reached an agreement early Tuesday to hand Greece €130 billion ($170 billion) in extra bailout loans to save it from a potentially disastrous default next month, an European Union diplomat said.

The euro surged as the news broke, climbing 0.7 percent to $1.328 within minutes. While much depended on the details of the deal, a final agreement on the bailout for Greece will take some pressure off the 17-country currency union, which has been battling a serious debt crisis for two years.

The deal — details of which were still being worked out by European finance ministers in an all-night session in Brussels — was expected to bring Greece's debt down to 120.5 percent of gross domestic product by 2020, according to the official. That's around the maximum that the International Monetary Fund and the eurozone considered sustainable.

The diplomat spoke on condition of anonymity because a formal announcement was pending.

The country needs the €130 billion ($170 billion) bailout so it can move ahead with a related €100 billion ($130 billion) debt relief deal with private investors. That deal needs to be in place quickly if Athens is to avoid a disorderly default on a bond repayment on March 20.

Last week, a new report from Greece's debt inspectors indicated that the country's debt would still be close to 129 percent of GDP by the end of the decade, despite massive new spending cuts planned by Athens and a tentative €100 billion debt relief deal with private investors.

That level would have prevented the IMF and some euro countries from putting up more rescue money — on top of a €110 billion bailout Greece received in 2010.

Moving in and out of talks with bondholder representatives and consultations with the IMF and the European Central Bank, the ministers pushed private investors to accept steeper losses, going beyond a 50 percent cut in the face value of their bonds.

It was unclear what the final deal with bondholder representatives looked like, but the lower debt level suggested that they agreed to further losses. Greek state television claimed early Tuesday that the private investors will see a 53 per cent cut on the face value of their bonds, bringing overall losses to around 75 per cent on the value of the bonds.

The big question will now be how many banks and other investment funds will actually agree to participated voluntarily and whether Greece will have to force some holdouts to sign up to make the deal effective.

The lower debt level also suggested that the ECB agreed to forego some profits on its Greek bondholdings to help close the funding gap in the new bailout package. Analysts estimate that the central bank owns between €50 billion and €55 billion in Greek bonds, which it bought at a discount.

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Greece to get $170B bailout, reduce debt

BRUSSELS (AP) — After more than 12 hours of talks, the countries that use the euro reached an agreement early Tuesday to hand Greece €130 billion ($170 billion) in additional bailout loans to save it from a potentially disastrous default next month.

The deal is expected to bring Greece's debt down to 120.5 percent of gross domestic product by 2020 — that's around the maximum that the International Monetary Fund and the eurozone consider sustainable.

The euro surged as the news of a deal broke early Tuesday. The accord should take some pressure off the 17-country currency union that has been battling a serious debt crisis for two years.

Without the deal, Greece was facing a potentially calamitous default next month and possibly being forced from the eurozone. The talks stretched into the early hours of Tuesday as ministers wrangled over how to cut Greece's debt to a level that it could eventually pay back while not raising their own commitments.

In the end, the country's private creditors were asked to take substantially more losses on their holdings than previously anticipated, cutting Greece's debt by an estimated €107 billion.

"It's no exaggeration to say that today is a historic day for the Greek economy," said Greek Premier Lucas Papademos, who rushed to the meeting to lend weight to his country's pleas for help.

Jean-Claude Juncker, the prime minister of Luxembourg who also chairs the meetings of eurozone finance ministers, said Greece's private investors — mostly banks and investment funds — have been asked to take a face value loss of 53.5 percent on their bonds.

On top of that, Greece's public creditors — central banks and the eurozone countries — also agreed to give Greece a break on its debt.

The eurozone countries will cut the interest that Greece has to pay for its first package of bailout loans to 1.5 percentage points over market rates from between 2 percentage points to 3 percentage points currently, cutting both its debt load and limiting the need for new rescue loans.

At the same time, the European Central Bank and the national central banks in the 17 countries that use the euro will also forego profits on their Greek debt holdings, again reducing the costs for Greece.

EU economic affairs commissioner Olli Rehn says Greece's new compliance with the terms of a new bailout will be ensured by a separate account containing enough money service its debt for three months.

That close monitoring was demanded by some members of the eurozone who are frustrated that Greece has not always enacted painful reforms and budget cuts on time.

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Associated Press writer Don Melvin contributed to this report.

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Source: Greece to get $170B bailout, reduce debt

BRUSSELS (AP) — After more than 12 hours of talks, the countries that use the euro reached an agreement early Tuesday to hand Greece €130 billion ($170 billion) in extra bailout loans to save it from a potentially disastrous default next month, an European Union diplomat said.

The euro surged as the news broke, climbing 0.7 percent to $1.328 within minutes. While much depended on the details of the deal, a final agreement on the bailout for Greece will take some pressure off the 17-country currency union, which has been battling a serious debt crisis for two years.

The deal — details of which were still being worked out by European finance ministers in an all-night session in Brussels — was expected to bring Greece's debt down to 120.5 percent of gross domestic product by 2020, according to the official. That's around the maximum that the International Monetary Fund and the eurozone considered sustainable.

The diplomat spoke on condition of anonymity because a formal announcement was pending.

The country needs the €130 billion ($170 billion) bailout so it can move ahead with a related €100 billion ($130 billion) debt relief deal with private investors. That deal needs to be in place quickly if Athens is to avoid a disorderly default on a bond repayment on March 20.

Last week, a new report from Greece's debt inspectors indicated that the country's debt would still be close to 129 percent of GDP by the end of the decade, despite massive new spending cuts planned by Athens and a tentative €100 billion debt relief deal with private investors.

That level would have prevented the IMF and some euro countries from putting up more rescue money — on top of a €110 billion bailout Greece received in 2010.

Moving in and out of talks with bondholder representatives and consultations with the IMF and the European Central Bank, the ministers pushed private investors to accept steeper losses, going beyond a 50 percent cut in the face value of their bonds.

It was unclear what the final deal with bondholder representatives looked like, but the lower debt level suggested that they agreed to further losses. Greek state television claimed early Tuesday that the private investors will see a 53 per cent cut on the face value of their bonds, bringing overall losses to around 75 per cent on the value of the bonds.

The big question will now be how many banks and other investment funds will actually agree to participated voluntarily and whether Greece will have to force some holdouts to sign up to make the deal effective.

The lower debt level also suggested that the ECB agreed to forego some profits on its Greek bondholdings to help close the funding gap in the new bailout package. Analysts estimate that the central bank owns between €50 billion and €55 billion in Greek bonds, which it bought at a discount.

View the original article here