Eurozone leaders OK 2d bailout for Greece
BRUSSELS, Belgium - Eurozone leaders on Thursday agreed to a sweeping deal that will grant Greece a massive new bailout - but likely make it the first euro country to default. The deal also will radically reshape the currency union's rescue fund, allowing it to act preemptively when crises arise.
BRUSSELS, Belgium - Eurozone leaders on Thursday agreed to a sweeping deal that will grant Greece a massive new bailout - but likely make it the first euro country to default. The deal also will radically reshape the currency union's rescue fund, allowing it to act preemptively when crises arise.
The agreement calls for the eurozone countries and the International Monetary Fund to give Greece a second bailout worth $155 billion, on top of about the same amount granted a year ago.
Banks and other private investors will contribute some $71 billion to the rescue package by either rolling over Greek bonds that they hold, swapping them for new ones with lower interest rates or selling the bonds back to Greece at a low price.
"For the first time since the beginning of this crisis, we can say that the politics and the markets are coming together," said European Commission President Jose Manuel Barroso.
Initial reaction from markets and analysts was cautiously positive. The euro, which had rallied sharply on expectation of the package, edged up further to gain 1.2 percent against the dollar.
The "summit conclusions surprise by their size and range," Marie Diron, senior economic adviser to Ernst & Young, said in a note. "The measures imply significant private sector involvement and very large further support from the EU. All politically acceptable measures are being used."
The eurozone will back up any new Greek bonds issued to the banks with guarantees if the deal is seen as a "selective default" by rating agencies, which is widely expected. If the agencies make true on their warnings, Greece will become the first euro country to ever be in default - if likely only for a short period of time.
The guarantees to new Greek debt help overcome one of the biggest obstacles to a private-sector contribution to the new Greek bailout. It means that Greek banks will be able to continue accessing liquidity support from the European Central Bank. Without that support, Greek banks would quickly collapse.