October 27, 2011
Prime Minister George Papandreou urged Greeks to back him in overhauling the economy after euro- area leaders agreed on a new financing package for the country and obliged bondholders to take deeper losses on its debt.
“The crisis gives us the opportunity and this agreement gives us time,” Papandreou said in a televised address this evening, after he and fellow government chiefs cajoled bondholders into accepting 50 percent writedowns on Greek debt. “We negotiated and managed to erase a very important part of our debt. Tens of billions of euros have been lifted from the backs of the Greek people.”
EU leaders boosted their rescue fund’s capacity to 1 trillion euros ($1.4 trillion) and carved out the second aid package for Greece at a crisis-fighting summit in Brussels that lasted into the early hours of this morning. The 17-nation currency and stocks climbed while bond spreads narrowed.
The reworked deal on Greece’s debt will cut the ratio to 120 percent of gross domestic product by 2020 from a forecast of about 170 percent next year. The 130 billion euros in public funding plus the 50 percent writedown on Greek debt follows a fully taxpayer-funded package of 110 billion euros in May 2010. Papandreou needs support from his voters to push through measures including job cuts to turn around an economy that is set to shrink 5.5 percent this year.
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