EU summit: Greek second bailout to follow debt swap

EU leaders in Brussels, 1 Mar 12 EU leaders hope the new deal for Greece will ease the bond market pressure

Greece will not get funds from a second EU/IMF bailout until its private creditors give final approval for their losses next week, EU ministers say.

Eurogroup chief Jean-Claude Juncker said Greece had taken all the legal action necessary to get the 130bn euro (£110bn; $175bn) bailout.

But the bailout must await the debt swap with private bondholders on 8 March, he said.

EU leaders are meeting in Brussels again to discuss the debt crisis.

As the summit got under way UK Prime Minister David Cameron complained that ideas to stimulate economic growth, which he set out recently in a joint letter with 11 other EU leaders, had been ignored.

Mr Cameron said the summit's draft conclusions ought to reflect the letter's call for swift action to lift regulatory burdens and expand the EU's single market.

Intensive negotiations over the Greek debt mountain dominated the run-up to the summit.

Private bondholders, such as banks and private investors, recently agreed to take a 53.5% loss on their Greek bonds.

Their 107bn-euro losses - the "haircut" - and a huge package of public sector cuts aim to reduce Greek debt from 160% to 120.5% GDP by 2020.

And a global financial body, the International Swaps and Derivatives Association, announced on Thursday that the debt write-off did not constitute a default.

A ruling of a "credit event" - a default - would have meant insurance against bond losses, called credit default swaps, would have been paid out. That would have caused further losses and uncertainty for already fragile financial institutions.

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?

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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Van Rompuy stays on

The EU summit was focusing on Europe's struggling economies, but other issues were also on the agenda, including an expected thumbs-up for Serbia's bid to join the EU. Serbia is poised to get candidate status, which paves the way towards EU membership.

The leaders also reappointed Herman Van Rompuy as European Council president for a second two-and-a-half year term.

As chairman of EU summits, Mr Van Rompuy has worked to co-ordinate EU policy on the debt crisis.

On Twitter he expressed his pleasure, saying it was "a privilege to serve Europe in such decisive times; also a big responsibility".

More Greek cuts

Earlier Greek MPs backed the last major package of reforms promised in return for a second EU/IMF bailout.

They pushed through a series of health budget cuts despite protests outside the parliament in Athens.

Rail and metro services shut down in Athens in another 24-hour strike against the government's austerity measures.

Eurozone finance ministers met before the EU summit to consider whether Greece had done enough for the second bailout.

EU leaders are hoping to devote the summit to growth and jobs.

On Wednesday the European Central Bank (ECB) provided a further 530bn euros of low-interest loans to 800 banks across the EU.

It is the second massive injection of liquidity by the ECB, after 489bn euros was lent in December.

European Commission President Jose Manuel Barroso has promised "less drama" than at recent EU summits which have been overshadowed by the Greek crisis.

The scale of Europe's jobs crisis was underlined by unemployment figures from Italy that showed a record jobless rate of 9.2% in January, up from 8.9% in December 2011.

The number of unemployed rose to 2.312 million, statistics agency Istat said.

Across the 17-country eurozone, unemployment was at 10.7%, the highest level since monetary union was launched in 1999, according to EU figures.

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