Europe

Greece averted nightmare scenario - finance minister

  • 22 February 2012
  • From the section Europe
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.

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.

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.

"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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