Greece averted nightmare scenario - finance minister

A blind woman chants slogans written in Braille during a demonstration in Athens against salaries and pensions cuts, 21 February Blind people were protesting against the cuts in Athens on Tuesday

Greece has avoided a nightmare scenario by agreeing to a 130bn euros (£110bn; $170bn) bailout deal, Finance Minister Evangelos Venizelos has said.

He said the deal was probably the most important in Greece's post-war history.

The cabinet has been meeting to finalise reforms demanded by international lenders, which include huge spending cuts and beefed-up monitoring by eurozone officials.

Trade unions have called strikes and protests for Wednesday.

Greece has already been through a massive austerity programme in return for an earlier bailout, and many are angry at the prospect of years more hardship.

Analysis

It was a fraught few weeks in the run-up to the eurozone meeting. Athens saw the worst rioting in years as parliament passed the latest austerity package; there were furious words exchanged between Greece and other eurozone governments, mistrustful of this country's commitment to reform; endless deadlines came and went as Greece teetered towards bankruptcy.

Greeks are a resilient people, well-versed in surmounting obstacles through their history. But that resilience is being sorely tested. The country has been living with punishing austerity for much of the past two years: unemployment has reached record heights at over 21%, the economy contracted by 7% in the last quarter of 2011. And now, with the bailout deal approved in Brussels, the cuts are set to get deeper still.

And Greeks are growing ever more doubtful that the path ahead will lead them out of this crisis. The government is acutely aware that support for the bailout and the austerity measures is costing it dearly in the opinion polls.

Opinion polls suggest that the two parties in the coalition, which currently dominate parliament, are facing huge losses at the next election, scheduled for April.

Parties on the far left and far right, which are set to make big gains, are opposed to the bailout deal.

Under the agreement hammered out in Brussels:

  • Greece will undertake to reduce its debt from 160% of GDP to 120.5% by 2020
  • private holders of Greek debt will take losses of 53.5% on the value of their bonds, with the real loss as much as 70%
  • eurozone experts will permanently monitor Greece's economic management
  • a constitutional change will give priority to debt repayments over the funding of government services

Mr Venizelos said the deal had given Greece a new opportunity, and had "avoided the nightmare scenario".

"What we have is the clear, explicit commitment of our peers that they will support us even after the end of the programme, until Greece returns to the markets," he said.

George Papandreou speaking on BBC Hardtalk: ''We will not default and we will not exit the euro''

The country has just over a week to approve a round of spending cuts of more than 3bn euros tied to the bailout.

At Tuesday's cabinet meeting, ministers discussed emergency legislation. A parliamentary vote is expected on Thursday.

Conservative leader Antonis Samaras, a member of the coalition and contender to become the next prime minister, warned that recovery hinged on economic growth.

"Without the rebound and growth of the economy... not even the immediate fiscal targets can be met, nor can the debt become sustainable in the long-term," he said.

Trade unions have called for new street protests on Wednesday, and there fears of fresh violence as the public mood hardens, the BBC's Mark Lowen in Athens reports.

The head of the opposition Communist party has vowed to oppose new cuts.

Athens and EU flag What went wrong in Greece?

What went wrong in Greece?

An old drachma note and a euro note
Greece's economic reforms, which led to it abandoning the drachma as its currency in favour of the euro in 2002, made it easier for the country to borrow money.

What went wrong in Greece?

The opening ceremony at the Athens Olympics
Greece went on a big, debt-funded spending spree, including paying for high-profile projects such as the 2004 Athens Olympics, which went well over its budget.

What went wrong in Greece?

A defunct restaurant for sale in central Athens
The country was hit by the downturn, which meant it had to spend more on benefits and received less in taxes. There were also doubts about the accuracy of its economic statistics.

What went wrong in Greece?

A man with a bag of coins walks past the headquarters of the Bank of Greece
Greece's economic problems meant lenders started charging higher interest rates to lend it money. Widespread tax evasion also hit the government's coffers.

What went wrong in Greece?

Workers in a rally led by the PAME union in Athens on 22 April 2010
There have been demonstrations against the government's austerity measures to deal with its debt, such as cuts to public sector pay and pensions, reduced benefits and increased taxes.

What went wrong in Greece?

Greece's problems have made investors nervous, which has made it more expensive for other European countries such as Portugal to borrow money.
Eurozone leaders are worried that if Greece were to default, and even leave the euro, it would cause a major financial crisis that could spread to much bigger economies such as Italy and Spain.

What went wrong in Greece?

Greek Prime Minister George Papandreou at an EU summit in Brussels on 26 March 2010
In 2010, the EU, IMF and ECB agreed a bailout worth 110bn euros (£92bn; $145bn) for Greece. Prime Minister George Papandreou quit the following year while negotiating its follow-up.

What went wrong in Greece?

Lucas Papademos
Lucas Papademos, who succeeded Mr Papandreou, has negotiated a second bailout of 130bn euros, plus a debt writedown of 107bn euros. The price: increased austerity and eurozone monitoring.

What went wrong in Greece?

Crowds
In May 2012 elections a majority of voters backed parties opposed to austerity, but no group won an overall majority resulting in political deadlock. Fresh elections have been called in June.
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"We insist on daily struggle to thwart the measures and this struggle cannot be a defensive one," said Aleka Papariga.

The prospect of permanent eurozone monitoring is also seen by many Greeks as a blow to national pride, and many question whether the austerity will actually improve the economy.

"The measures are just going to make us sink further into recession. We'll be worse off this year than last," Agelos Sotirchos told the BBC as he walked through Athens' main meat market.

Another shopper, Vasilis Bouzianis, said the bailout appeared to be the only option for Greece.

"There are a lot of difficulties for all the people; we lose more money, we pay more taxes, but if we went ahead with bankruptcy, the problem would be much bigger," he said.

The agreement was thrashed out over 13 hours of talks involving the international "troika" of the IMF, the European Central Bank and the European Commission.

Eurozone leaders hailed the deal as a triumph, and said it had saved Greece from going bankrupt.

Former Greek Prime Minister George Papandreou told the BBC's Hardtalk programme that Greece had made major sacrifices and deserved more respect from international analysts and financial markets.

"We will not default and we will not exit the euro - I think this deal has clinched this prospect," he said.

"Of course it means hard work but I also would demand more respect. We have made major sacrifices in Greece."

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