Eurozone Agrees Second Mammoth £110bn Bailout For Greece After Marathon Talks

'Marathon Is A Greek Word': Eurozone Agrees Second Bailout

Eurozone governments finally came to the rescue of Greece on Tuesday, approving a second massive bail-out 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.

But 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.

The deal nearly came unstuck over a requirement on Athens to get the Greek projected debt level down to around 120% of national wealth by 2020.

George Osborne insisted on Tuesday the deal was "good for Britain", telling journalists: "Of course, resolving the Greek situation is only part of resolving the eurozone crisis but I think we took a really significant step towards that last night and that is good for Britain because resolving the eurozone crisis would be the biggest boost that Britain could get for its economy this year."

A protester shines a light from a laser beam on the face of a riot policemen

Extra hours of financial juggling brought eurozone negotiators close - at least on paper - by massaging the figures to deliver a theoretical 121% GDP level by 2020.

Greece had only offered 129%, which was rejected as inadequate, although nothing like as bad as the current unsustainable 160% 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.

But the deal is based on long-range forecasts of Greek's best-case scenario for slashing its debts over the next eight years and was dismissed by some as undeliverable.

Carsten Brzeski, analyst at ING Bank, said: "It looks like a deal, it walks like a deal, it is almost a deal. Last night's eurogroup meeting has paved the way for a second Greek bailout but the crisis marathon is not over."

A demonstrator wears an 'anonymous mask' during a protest against austerity measures in front of Parliament in Athens

Riot police spary tear gas during a small demo in Syntagma Square, during a protest against austerity measures

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.

A deal was desperately needed to give Greece enough funding to meet its next debt repayment of 14.5bn euro (£12bn), due on March 20.

But beleaguered Greek prime minister Lucas Papademos has confronted violent street protests for months as he has tried to impose the deep public sector cuts demanded by the EU and IMF in return for another enormous bail-out.

And his troubles are far from over: Greece has been in recession for five consecutive years and the latest deal cannot guarantee much more than temporary relief from the crisis, unless the cutbacks work.

To ensure they do work, Germany, the Netherlands, Austria and Finland demanded another condition from Greece late last night - the establishment of a permanent office in Athens made up of representatives from the EU, IMF and European Central Bank to over see Greek tax and spend policies.

The IMF already has a base in Greece to monitor Greek finances and EU and ECB officials have been commuting between Brussels and Athens for months checking Greek Treasury books as bail-out terms were bartered.

A protester wears a wig with a sticker on it reading 'I need a 50% haircut'

Senior citizens demonstrating in Athens due to the financial crisis

Dutch finance minister Jan Kees de Jager said he supported a "permanent troika in Athens" to keep an eye on events.

"When you look at the derailments in Greece which have occurred several times now, it is necessary that there is some kind of permanent presence of the troika in Athens," he said.

However some frustrated EU politicians began to hint that a Greek default and departure from the euro would not necessarily be a crisis for the single currency.

But by the start of the latest talks last night, Eurozone nations rallied behind an all-out effort to keep Greece on board.

Even German finance minister Wolfgang Schauble - who last week indicted willingness to let Greece leave the eurozone rather than letting his country withstand the lion's share of another bail-out - said last night he was now "confident" of a deal on a new rescue programme.

Greek finance minister Evangelos Venizelos declared that his government had "fulfilled all the requirements for the approval of the new programme".

Riot policemen walk by as a petrol bomb, thrown by a protester, explodes near them

Police detain a protester during a demonstration in Athens

Luxembourg prime minister Jean-Claude Juncker, chairman of the eurozone countries, told a press conference the deal "gives Greece the time needed to return to sustainable growth and preserve financial stability in Greece and in the euro area as a whole".

He said ministers were aware of the sacrifices being made by Greek citizens, but more would be needed "to return Greece to a sustainable growth path".

He added: "We are making every effort so that the (bail-out) programme will be successful. This will require resolute action from all sides."

Mr Juncker confirmed that the deal included a reinforced presence of representatives of the EU, ECB and IMF in Athens to head off any "slippage" in Greek implementation of its promised debt and deficit-reducing measures.

Mr Juncker estimated the entire negotiating session to reach the deal at "between 13 and 14 hours" - and EU Economic Affairs

Commissioner Olli Rehn added: "Today I have learned that 'marathon' is a Greek word."

He made clear the eurozone now expected action from Greece, saying: "We expect the unprecedented solidarity of Greece's partners to be matched by a strong commitment by Greek leaders to fully implement their austerity programme, first and foremost for the benefit of Greek citizens."

Rehn, in a dig at the chaotic and profligate Greek public finances which helped push the country to the brink when the economic crisis struck, warned: "The Greek economy can no longer rely on a large administration financed by cheap debt, but by investment to facilities new growth and jobs.

A woman holds a Greek flag as she takes part in a demonstration

"For this to happen, the conditions for investment need to be created and improved - a fairer tax system, an effective public administration, and a more favourable business climate."

Rehn added: "All in all, today's deal is a key remaining building block of our comprehensive crisis response. With this agreement we have a real chance to turn a corner and move towards sustainable growth and job creation."

Asked if better financial reform conditions were in place compared with those demanded when the first Greek bail-out was agreed, Rehn pointed out that Irish and Portuguese reform programmes were already successful but the problems in Greece had concerned its financial administration and political unity.

"The challenges stemming from weak administrative capacity and weak political unity in Greece are being addressed," he said.

IMF chief Christine Lagarde commented: "It is best to look forward and make sure that Greece is in the best position to deliver on its commitments.

"There is more focus this time on competitiveness and structural reforms, and market reforms to unleash as much growth as possible in the Greek economy."

On lowering the Greek debt, she said Greece was facing a 160% level of debt compared to its national wealth without the reforms, and the 160% figure remained a threat in the event of the failure of the reform package.

She emphasised: "In the event of failure to deliver on the reforms that is what would happen: it is not an easy (reform) programme - it is ambitious."

UK Independence Party leader Nigel Farage said the bail-out would only delay, not prevent, Greek departure from the euro.

He said: "The Greeks don't need Draconian death by a thousand cuts; they need the drachma back so they can reboot their economy."

He went on: "Cheap credit from inappropriate euro membership was a disaster for the Greek economy. Eurozone membership is now also a disaster for their democracy."

He said a bond write-off - Greece's private creditors are forgoing 53.5% of their repayments - was "a default by another name", adding: "This so-called bailout is just delaying the inevitable euro exit by Greece.

"It is time to bow to reality and set the Greek people free from this dreadful euro prison."

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