Greece economy crisis: Europe agrees to second £110bn bailout
- Deal comes after more than 12 hours of talks in Brussels
- Several countries remain sceptical over whether Greece is able to deliver budget cuts
- Some leaders demanded 'permanent' control of Greece's budget to tackle its huge debts
By Jason Groves
Last updated at 4:27 AM on 21st February 2012
Eurozone governments have come to the rescue of Greece by approving a second £110billion bailout to prevent the collapse of its stricken economy.
The deal came after months of wrangling and a last round of more than 12 hours of talks in Brussels.
Haggling over figures, financial targets and Greek government belt-tightening pledges went on through the night in a last-ditch attempt to rally markets and put crisis-hit Athens back on the path to economic recovery.
European leaders had demanded ‘permanent’ control of Greece’s budget as they edged closer to the second deal.
Greece's Prime Minister Lucas Papademos, Germany's Finance Minister Wolfgang Schaeuble and Dutch Finance Minister Jan Kees de Jager talk together at the European Union council headquarters in Brussels
However several countries remained sceptical about whether Greece was willing and able to deliver the budget cuts needed to bring its vast debts under control.
The depth of concern was highlighted by Dutch finance minister Jan Kees de Jager’s call for international monitors to take up a ‘permanent’ position in Athens to oversee reforms.
Mr de Jager said the European Commission, European Central Bank and International Monetary Fund should all be given greater control over Greece’s budget as the price for any bailout deal.
He added: ‘We will see to a rigid and very strict implementation of those demands and only then will we make the next step. I am in favour of more control, more supervision – money is the thing we can control Greece with.’
The imposition of permanent monitors in Athens is likely to fuel resentment in Greece, where feelings are already running high because of the tough austerity package demanded by Germany and other northern European countries.
The proposed rescue plan would write off £85billion of Greek debt, with private lenders accepting a 70 per cent cut in what they are owed.
Unrest: Two immigrant men push a shopping trolley through the streets of Athens' Omonia district
Riot policemen are attacked with flares during clashes in front of the Greek parliament over the weekend
But diplomats and economists say it may only delay a deeper default by a few months. Some experts believe the scale of the austerity measures threatens to send the Greek economy into freefall. In the final three months of last year, the economy shrank by 7 per cent.
While European shares and the euro have been buoyed by hopes of a deal, the prospect of further cuts sparked riots involving thousands of protesters in Athens at the weekend.
Eurozone leaders arriving in Brussels yesterday voiced cautious optimism that a deal was close. Jean-Claude Juncker, prime minister of Luxembourg and chairman of the eurozone finance ministers group, said: ‘We have to deliver, because we don’t have any more time.’
Greece’s unelected prime minister, Lucas Papademos, flew to Brussels to join the talks as about 3,000 demonstrators massed in Syntagma square in Athens and riot police shielded the national assembly from the threat of attack.
The deal is based on long-range forecasts of Greek's best-case-scenario debt reduction chances over the next eight years, with some pundits instantly dismissing the deal as undeliverable.
In return for the latest 130bn euro (£110bn) bail-out and a private creditor debt write-off worth about another 100bn euros (£84bn), the Greek government is pledged to implement fully a severe austerity package of pay, pension and jobs cuts, as well as finding savings of 325m euros (£270m) in this year's national budget.
Demonstators gather in front of Parliament during a protest against austerity measures Athens, Greece
A riot policeman sprays tear gas at protesters in front of the Greek parliament during a demostration against new austerity measures
The deal nearly came unstuck over a requirement on Athens to get the Greek projected debt level down to around 120 per cent of national wealth by 2020.
Extra hours of financial juggling brought eurozone negotiators close - at least on paper - by massaging the figures to deliver a theoretical 121 per cent GDP level by 2020.
Greece had only offered 129 per cent, which was rejected as inadequate, although nothing like as bad as the current unsustainable 160 per cent of GDP Greece is grappling with.
Pundits predicted short-term rallying of markets followed by a fall-back when the continuing massive scale of the debt mountain Greece has to climb becomes clear.
The Greek economy received a 110bn euro (£91bn) bail out from the EU and IMF in 2010 but it was not enough to lift Greece out of crisis.
Ahead of the overnight talks some critics were warning against 'throwing good money after bad', but the price of letting Greece default and be forced out of the euro currency was seen as a worse option.
Instead the talks concentrated on tying Greece as tightly as possible to austerity measures which will chip away at its debt and deficit levels.
Political parties on all sides were even pressed to promise no easing of the austerity package in forthcoming Greek elections.
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