Eurozone finance ministers have just ended two days of talks regarding Greece's bailout. Initially, there was general apprehension as to whether the meeting would drag on if Greece and the EU troika (comprising the European Commission, the European Central Bank and the International Monetary Fund) were unable reach a deal that will secure Greece’s bailout by the end of the day.
This is the second time Greece is seeking a bailout. Should Athens want to avoid bankruptcy, it will need to repay 130 billion euros by 20 March; inability to pay back its loan by this dateline will lead to a default that could shatter the euro area.
Prior to the meeting, despite Greece having agreed to the conditions of the new bailout scheme recently, countries like the Netherlands were still reluctant to lend money to the country. Said Jan Kees de Jager, the finance minister from the Netherlands, “We’ve seen that Greece time and time again fails to satisfy the conditions that the international community makes…In the Netherlands, it really is an issue that you have to lend money to a country for the umpteenth time hasn’t held itself to its agreements.”
During the talks, finance ministers discussed how to reduce Greece’s debt load further and impose tighter control over the country’s spending. Greece now has a debt that amounts to as much as 160% of its Gross Domestic Product (GDP), but the IMF hopes to bring the debt down to 120% of the GDP by 2020. A report released last week by the Troika stated that even with spending cuts and the new bailout plan, Greece's debt will only be reduced to 129% of its GDP at the end of the decade. However, it seems that it has finally been agreed that Greece will undertake to reduce its debts to no more than 121% of its GDP by 2020. Details in relation to the exact terms of agreement which finally concluded the talks have not yet been released.
Another issue that was considered was the rescue plan which intends to write off 100 billion euros of debt that Greece owes private lenders, who have agreed to accept a 70% reduction in what Greece owes them. In return, they will receive cash and bonds expected to mature in 30 years’ time.
Even though the main talks with financial ministers have ended, sideline negotiations in Brussels between Greek officials and their international lenders to write off even more debt are still on-going.
Report: EU works through night on Greece bailout [Associated Press, 20 February 2012]
Report: Eurozone ministers hold marathon talks on Greek bailout [BBC, 20 February 2012]
Report: Greek rescue in prospect as ministers meet [Bloomberg, 21 February 2012]
Report: Eurozone ministers 'back 130bn-euro bailout for Greece [BBC, 21 February 2012]