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Greece says second bailout 'great relief'

By Nicholas Paphitis

Associated Press

Published: Friday, July 22 2011 6:35 a.m. MDT

Greek Finance Minister Evangelos Venizelos speaks during a news conference in Athens, on Friday, July 22, 2011. Greece's finance minister expressed "great relief" Friday in the wake of a second European bailout for the country's crisis-hit economy, and markets rallied on the news.Eurozone countries and the International Monetary Fund pledged Thursday to give Greece a 109 billion euros ($155 billion) worth of rescue funds, on top of the 110 billion euros granted a year ago.

Petros Giannakouris, Associated Press

Enlarge photo»

ATHENS, Greece — Greece's finance minister expressed relief Friday in the wake of a second European bailout for the country's crisis-hit economy, and markets rallied despite a leading ratings agency's warning of an impending default rating for Athens' bonds.

While likely to have few repercussions, the rating would be an embarrassing first for a country using the euro

Evangelos Venizelos promised to press ahead with unpopular cost-cutting measures aimed at generating a primary budget surplus next year, and an ambitious privatization program seeking to raise €50 billion ($71 billion) by 2015.

Eurozone countries and the International Monetary Fund pledged Thursday to give Greece a €109 billion ($155 billion) worth of rescue funds, on top of the €110 billion granted more than a year ago.

The new loans will carry a generous 3.5 percent interest rate and maturities of between 15 and 30 years.

Greek shares enjoyed a bull run, with the benchmark index up nearly 5 percent by midday. Exorbitant borrowing rates — which have kept Greece locked out of bond markets — shot down to 14.3 percent for 10-year bonds, from more than 18 percent a few days ago.

"(The decision) provides a great relief for the Greek economy, which will gradually be passed on to the real economy," Venizelos told a news conference in Athens. "But this in no way means we will relax our efforts. ... We must continue implementing our program and remain committed to the great target of meeting budgetary goals."

He added: "Yesterday's decision set a bottom of the barrel for the Greek public debt. Now we have a new momentum."

Greece got the rescue deal three weeks after passing a new five-year austerity program worth €28 billion ($40 billion) in budget savings and €50 billion ($71 billion) in privatizations — facing down violent protests, strikes and a sharp drop in popularity for the governing Socialist party.

Already, a year and a half of austerity has left Greeks with sharply reduced pensions, lower public sector wages, higher retirement ages and ever-increasing taxes. But the government says the cuts have paid off.

"We have made great sacrifices but they have not been in vain," Prime Minister George Papandreou said. "Our people has been saved from the noose of bankruptcy."

"I know very well what hardship every Greek family is undergoing," he told a televised Cabinet meeting. "The hardship is not over, but for the first time in months ... we have managed to create strong conditions of security for the future. We can feel proud that we will not leave our children with an insurmountable problem."

Anti-austerity protests continued on Friday, with striking taxi drivers occupying the entrances of archaeological sites on the holiday islands of Corfu and Zakynthos, and letting tourists in for free.

Others blocked two border crossings with Macedonia in the north, and took over highway toll posts, waving motorists past.

Taxi drivers started an open-ended strike Monday to protest changes in licensing rules under austerity reforms.

The Athens stock rally was led by banks that saw their share value jump by 9 percent, on safeguards provided on the new bailout-loan agreement.

"The Greek banking system is perhaps the most guaranteed and secure in Europe, if not elsewhere. There is now a great protective umbrella over Greek banks," Finance Minister Venizelos said.

Speaking shortly before Fitch Ratings' warning that it would briefly place Greece in "restricted default" due to bondholders' losses as part of the rescue package, Venizelos argued that such a decision would not have a detrimental effect.

"The issue of bank liquidity has been secured. This liquidity will be channeled to the real economy," he said. "Whatever reaction outside the institutional system, whatever rating, has been answered in advance and will have no real repercussions."

Thursday's deal received a mixed reaction from Greece's media. Liberal Eleftherotypia newspaper's main headline warned of "loan sharks bleeding the people for 30 years," while conservative Kathimerini saw "a great relief for Greece and the euro."

"Let us hope that the government and the political class will not relax their efforts," Kathimerini said in an editorial.

But Eleftherotypia said the deal came at a heavy price. "Half of this relief will be lost through the significantly higher rates that Greece will be paying to private lenders for many years to come, as part of their agreement to become part of the solution," an editorial said.

Athens coffee shop owner Manolis Volyrakis said he was pleased with the bailout.

"I believe that the results from yesterday were good, from what we heard on the news," he said. "We managed to get an extension to pay our debt and better interest rates."

AP television staff in Athens contributed

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