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Greece has won big breathing space with long-frozen Euro Zone loans to restart from December and a first clear admission that a chunk of the country’s debt burden will need to be written off down the line.
After 13 hours of talks in Brussels, the Euro Zone and the International Monetary Fund agreed to unlock 43.7 billion euros ($56 billion) in loans and on the need to grant significant debt relief going forward for decades to come.
Greece must still meet a series of agreed conditions but “the decision will certainly reduce the uncertainty and strengthen confidence in Europe and in Greece,” said European Central Bank President Mario Draghi, who left the talks before a final.
Starved of bailout financing since the summer, Greek Prime Minister Antonis Samaras hailed the deal in Athens, while German Finance Minister Wolfgang Schaeuble said the package would be presented to German lawmakers by the end of the week.
Other member states will also have to obtain their parliament’s approval for the deal.
“Everything has gone well,” Samaras told reporters in Athens.
“All Greeks have fought (for this decision) and tomorrow is a new day for every Greek person,” he added.
Finance ministers, the IMF and the ECB said the money would be paid in four instalments from December 13 through until the end of March, conditional on Greece funnelling income back to creditors at source and on the implementation by Athens of tax reforms settled with creditors.
The results of the “laborious” negotiations according to IMF head Christine Lagarde are intended to see Greece’s debt-to-GDP ratio fall from an estimated 144 per cent to 124 per cent come 2020, and “substantially below 110 per cent” of gross domestic product by 2022.
“The IMF wanted to make sure the euro partners would take the necessary actions to bring Greece’s debt on a sustainable path,” said Lagarde. “I can say today that it has been achieved.”
There will be a mixture of techniques used to bring down Greece’s debt burden.
These will begin with a buyback by Greece of old debt that has fallen in value on commercial money markets as well as national central banks across the Euro Zone foregoing profits on holdings of Greek debt whose worth has slumped.
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