Tuesday, February 21, 2012

Europe Reaches a Greek Deal

Wall Street Journal
February 21, 2012

Greece ended months of uncertainty by finally securing a new bailout and debt-restructuring agreement with euro-zone finance ministers, but doubts remain over whether Greece will be able to meet the ambitious terms of the accord.

The finance ministers agreed on the long-awaited €130 billion ($171.9 billion) deal after haggling into the early hours of Tuesday morning to settle the final details.

Officials said the meeting, which lasted nearly 13 hours, produced a plan that would reduce Greece's debt to 120.5% of gross domestic product by 2020. International Monetary Fund Managing Director Christine Lagarde said that target was lowered from 129% at the start of the meeting.

Private-sector creditors agreed to take a write-down on their bonds of 53.5%—more than the 50% write-down that had been conceded before the meeting. The private-debt exchange is expected to cut Greece's debt by €107 billion, according to the Institute of International Finance, which negotiated on behalf of bondholders.

According to a statement from the finance ministers, Greece would also benefit from an arrangement in which the European Central Bank would distribute profits on its estimated €45 billion to €50 billion in holdings of bonds it bought in the secondary market in 2010-11 to euro-zone governments, which may then use them to help Greece.

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