In Greece, debt deal gets a mixed reception

By Theodora Tongas

Associated Press

Published: Tuesday, Feb. 21 2012 4:45 p.m. MST

Pedestrians pass next to an hourglass graffiti as a shoe shiner is seen in the background in Athens, Monday, Feb. 20, 2012. Eurozone finance ministers are set to meet on Monday in Brussels where close to a euro 130 billion ($171 billion) bailout to help Greece avoid bankruptcy will be decided in the wake of huge protests against austerity measures called for by the Greek caretaker government.

Thanassis Stavrakis, Associated Press

ATHENS, Greece — Greeks were torn between relief and foreboding on the news Tuesday that their country has received a new massive bailout — while the aid will protect them from a calamitous default and keep them in the euro bloc, it will also cost households years of economic hardship.

The initial relief created Tuesday by the 17-nation eurozone's approval of a new €130 billion ($170 billion) rescue package 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 — a combined package of foreign loans equivalent to about €22,000 ($29,000) for every Greek citizen, children included. National debt already amounts to about €32,000 ($42,300) each.

The hope is that the aid will grant the country the breathing space to enact widespread reforms and set it back on a path to growth.

Finance Minister Evangelos Venizelos said the agreement managed to prevent a potential catastrophe.

"We avoided the nightmare scenario," Venizelos said after returning to Athens following 15 hours of negotiations in Brussels. "We had a positive outcome, which, as I said in Brussels, was neither easy nor obvious."

Venizelos insisted that the way forward now involved "work, work, work, systematic effort, collectivity, unity, consensus, responsibility" so that Greeks can pull their country out of the crisis that has threatened to pull down Europe's single currency.

The government, meanwhile, raced ahead with tougher austerity reforms, promised for the new rescue money, submitting three emergency bills to parliament in two days to set up the next round of drastic cuts.

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. That was not enough for the country to pay off its debts, however, and without more help the country faced defaulting on a bond repayment it could not afford next month.

Some in Athens 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.

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.

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