February 21, 2012
Eurozone finance ministers reached a long-delayed €130bn second bail-out for Greece after strong-arming private holders of Greek bonds to take even deeper losses than they had agreed last month.
According to European diplomats, the German and Dutch finance ministers pushed for further “haircuts” after a confidential debt analysis showed that the previously-negotiated deal would cost €136bn and would only lower Greek debt to 129 per cent, rather than 120 per cent, of economic output by 2020.
The diplomats said Jan Kees de Jager, the Dutch finance minister, and Wolfgang Schäuble, his German counterpart, sent Greek leaders back to bondholder representatives for further cuts at least four times over the course of nearly 14 hours of negotiations.
Although Greek bondholders agreed in October to accept a 50 per cent cut in the face value of their bonds in face-to-face negotiations with Nicolas Sarkozy, France’s president, and German chancellor Angela Merkel, they will now be offer a “voluntary” deal with a haircut of 53.5 per cent.
That will get Greek debt levels to 120.5 per cent by 2020, close to the IMF’s goal for long-term debt sustainability.
European Central Bank president Mario Draghi called the deal “a very good agreement.”
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