Tuesday, February 21, 2012

Eurozone ministers agree on 2nd bailout package for Greece

Eurozone finance ministers talk while attending a Eurogroup meeting at the European Union council headquarters, Brussels, February 20, 2012

Source: Press TV

Eurozone finance ministers have agreed to provide Greece with a new bailout package to help the heavily indebted country stabilize its debt-to-GDP ratio and avert looming bankruptcy.

The long-awaited package worth 130 billion euros was sealed in Brussels on Tuesday morning after more than 12 hours of intensive negotiations.

The rescue loan is meant to bring down Greece’s debt to 120.5 percent of its gross domestic product (GDP) by 2020.

Eurozone officials had on Monday expressed concerns over how Athens could manage to reduce its debt, while imposing harsher austerity measures.

The deal, however, was vital for Greece’s coalition government to pay off a 14.5-billion-euro bond redemption payment on March 20. Athens risked going bankrupt without the rescue package as it did not have the necessary funds to make the payment.

Greece had earlier in the month approved the austerity cuts demanded by the troika of the European Union, the European Central Bank and the International Monetary Fund, which was required in order to unlock the new bailout package.

The cuts include a 22-percent reduction in the minimum wage, 150,000 civil service layoffs, and a 15-percent cut in supplementary pensions.

The announcement of the austerity measures caused days of violent demonstrations in Athens that led to tens of people being injured, more than 100 shops being looted and a number of buildings being set on fire.

Greece also implemented harsh austerity measures in return for a first 110-billion-euro bailout package received in 2010. Greeks have been turning up on the streets for anti-government demonstrations on numerous occasions since the austerity cuts were first implemented in early 2011.

The country has been in recession since 2009, despite the austerity cuts and the bailout funds, which are meant to stimulate growth for its troubled economy.

Greece’s debt stood at 161.7 percent of the GDP in 2011, which is the highest debt ratio in the eurozone. Moreover, the country witnessed its economy contracting by 7.0 percent in the fourth quarter of 2011. Unemployment currently stands at 20.9 percent in the European state. The Standard & Poor's credit rating agency rates Greece at CC, which is almost comparable to a default.

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