Eurozone Approves Launch of Second Greek 'Bailout'

Greek riot police battle demonstrators in downtown Athens during rebellions against the imposition of a new round of austerity measures in the European state. The world capitalist crisis has swept through Europe causing great destruction., a photo by Pan-African News Wire File Photos on Flickr.

Eurozone approves launch of second Greek bailout

English.news.cn
2012-03-13
12:31:24
Xinhua Weibo

BRUSSELS, March 13 (Xinhua) -- Eurogroup President Jean-Claude Juncker announced late Monday that eurozone finance ministers had politically adopted the 130-billion-euro (about 171 billion U.S. dollars) second bailout program for Greece.

"With the completion of the prior actions and the successful PSI (private sector investment) operation, the new Greek program is not only in its starting blocks but has been politically adopted tonight by the Eurogroup," Juncker said at a press conference after a meeting of eurozone finance ministers.

The bailout program is expected to be formally launched Wednesday when the Eurozone Working Group (EWG) consisting of the eurozone deputy finance ministers will meet and check if all the procedures needed to kick off the bailout be fulfilled, said Juncker.

He said, however, the final launch of the bailout plan would depend on the decision by the International Monetary Fund (IMF) on Thursday if the agency would contribute 28-billion euros as proposed in the bailout package approved on Feb. 21.

Juncker said he was "quite confident that the decision will point in the right direction."

"Against this background, we approved the launch of the second program, pending the completion of the national procedures," he added.

The president hailed the bailout program for the 2012-2014 period as an "unprecedented amount of official financing" that is being committed to securing Greece's future in the euro area, "which is without any doubt."

"Greece will be a member of the euro area whatever will happen," said Juncker, who cited a latest troika (EU, IMF and ECB) report forecasting that the successful debt swap will allow the Greek debt-to-GDP ratio to decline to 117 percent in 2020.

Earlier in the day, the Greek government said it had completed a bond swap program worth over 177 billion euros (about 232 billion U.S. dollars), as part of efforts to avoid a disorderly default.

The program, under which creditors exchange their holding of maturing bonds issued under the Greek law with lower-yield, longer-term ones, got the voluntary support of 85.8 percent of private bondholders.

Those reluctant to sign up to the swap deal will also be forced into participation in line with the "collective action clauses," which were included into the Greek law on March 9.

Under the deal, private creditors will lose more than 70 percent on their holdings of the Greek bonds, allowing Athens to slash 105 billion euros of its debt from the total pile of 305 billion euros.

The deadline for investors to accept debt reduction for bonds issued under foreign law has been extended to March 23 and the debt swap is due to be completed in early April.

Securing the writedown was one of the most important preconditions for the launch of the 130-billion-euro international bailout, the second of its kind for Athens since May 2010. Without the bailout, Greece could face a debt default as early as on March 20.

Debt-laden Greece has been working hard to convince the troika of European Union, IMF and the European Central Bank of its determination to repair the country's balance sheet, which saw its debt amount to 160 percent of its GDP after years of over-spending.

The Greek parliament approved drastic cuts in pension and public-sector employment, as part of the reform program to slash deficit and boost development in the country.