Europe agrees on new Greece bailout package

California Telegraph Tuesday 21st February, 2012

BRUSSELS - After months swinging from yes to no amid hectic negotiations, eurozone finance ministers have finally agreed to save Greece from bankruptcy and approved a new bailout of $172 billion for the crisis ridden nation.

The rescue plan was approved in exchange for severe austerity measures and strict conditions on Greece, and private bondholders accepting losses deeper than expected.

The measure was given a final nod after over 13 hours of talks between EU finance ministers.

"We have reached a far-reaching agreement on Greece's new programme and private-sector involvement," Jean-Claude Juncker, the prime minister of Luxembourg, announced Tuesday morning.

Junker heads the group of EU finance ministers.

The second bailout package of 130 billion euros will help Greece to stave off its imminent bankruptcy in mid March, when it needs to repay a huge debt.

Under the bailout conditions, Greece will have to reduce its debt to about 120.5 per cent of its gross domestic product by 2020, from about 160 per cent now.

But the country will pay lower interest rates on its bailout loans as the European Central Bank also agreed to give up profits from Greek bonds bought at a discount, and to pass those gains back to the government in Athens.

The rescue plan is being tipped as a new turning point in the European debt crisis that had exposed economic vulnerability of the shared currency itself.

It was the second time Greece had sought a bailout from international lenders.