July 21, 2011
European leaders have agreed a new €109bn bail-out of Greece under which private bondholders will be called on to participate for the first time, contributing a target of a further €37bn.
The deal was a political victory for Angela Merkel, Germany’s chancellor, but one that will almost certainly lead to the first default on eurozone bonds since the creation of the single currency.
In addition to the €109bn in new loans from international lenders, the agreement includes a commitment from Europe’s leaders to support Athens until it is able to return to the financial markets – a potentially unlimited guarantee that could see European taxpayers fund Greece for years.
At a momentous summit in Brussels anxiously awaited by investors, eurozone heads of government unveiled a three-year programme that would include a target of €37bn in bondholder commitments to either swap or rollover their debt for new bonds that mature in 30 years.
But the contribution by private creditors will only be known when bondholders decide if they will take part in the proposed programme.
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Read the Statement (draft)
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