In Greece, debt deal gets a mixed reception

By Theodora Tongas

Associated Press

Published: Tuesday, Feb. 21 2012 7:17 a.m. MST

A pensioner shouts slogans during a protest against the Greek government's planned pension cut, outside Labor Ministry in Athens, on Tuesday, Feb. 14, 2012.

Thanassis Stavrakis, Associated Press

Enlarge photo»

ATHENS, Greece — Greeks greeted uneasily the news on Tuesday that their country will likely avoid defaulting on its debts next month and the euro should remain their currency — at the cost of years of economic hardship.

The relief engendered by the 17-nation eurozone's decision to back a new €130 billion ($170 billion) rescue was offset by a grim reality: Greece faces many more years of sacrifice, on top of a grueling 24 months of austerity measures that have contributed to record high unemployment and a rapidly contracting economy.

"I don't see (the agreement) with any joy because again we're being burdened with loans, loans, loans, with no end in sight," Athens architect Valia Rokou said.

The deal in Brussels gives Greece its second financial lifeline in less than two years and the hope is that it will grant the country the breathing space to enact widespread reforms and set it back on a path to growth.

Greece has been surviving since May 2010 on a first €110 billion ($146 billion) batch of loans from the eurozone and the International Monetary Fund.

Some Greeks noted that despite the gloomy future, the rescue deals lightened the immediate financial uncertainty looming over the country.

"Everyone was depressed ... This news gives me great joy," said Christos Kontogeorgis, a pensioner in the capital.

As well as securing another deal with its European partners and the IMF, Greece is hoping to get its private creditors to agree a massive writedown in the holdings of their Greek debt. Banks, pension funds and other private investors are being asked to forgive some €107 billion ($142 billion) of the total €206 billion ($273 billion) in devalued Greek government bonds they hold.

Private bondholders will trade their bonds with new ones carrying much longer maturities and lower interest rates — an annual 2 percent by 2015, 3 percent to 2021 and 4.3 percent after that.

"It's not every day that €100 billion in public debt is written off, or loans for €130 billion agreed," Ta Nea newspaper said in an editorial. "There will be new sacrifices and difficulties, particularly for middle and lower earners. We must hope that this new period will become an opportunity for growth and better prospects."

The head of the conservative New Democracy party, the junior partner in Greece's interim coalition government, said the deal buys Greece time and hope of recovery.

"Greece is in pain and the people is suffering, therefore this is no time for jubilation," Antonis Samaras said during a visit to Cyprus.

Greece is in a fifth year of recession, with the economy forecast to shrink 4.5 percent this year before starting to expand again in 2014 — although by then it will have contracted by more than 17 percent since the beginning of the crisis in 2009. Unemployment is at 21 percent, with one in two workers under 25 out of a job.

Majority Socialist leader George Papandreou urged Greeks "to continue the fight we have started, despite the huge price, and not abandon the effort halfway through."

Without either aspect of Tuesday's agreement, Greece would have soon been forced to default on its debts — halting pension and civil servant salary payments. In all likelihood, Greece would have had to leave the common European currency it joined in 2001.

"I feel relieved to start with, because my country has escaped the immediate danger it faced," said Athens lawyer George Sabalos, 40. "But I'm also troubled by our partners' demand that the country's constitution should be modified as part of the guarantees they are seeking, because I believe that is a rather excessive demand that goes against the principle of solidarity."

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