After marathan talks in Brussels, it was decided that Greece will get loans of more than €130 billion (£110bn; $170bn) and have about €107bn of its debt written off. In return, it must slash its debt from 160 per cent to 120.5 per cent of Gross Domestic Product within eight years and accept a permanent EU economic monitoring mission.
Including Greece’s first bailout worth €110bn, the new deal means every Greek man, woman and child will owe the eurozone and the IMF about €22,000.
The country needs the bailout funds to avoid bankruptcy on 20 March, when maturing loans must be repaid.
The euro immediately rose on reports of the deal, which was announced yesterday after 13 hours of talks.
The package was welcomed by Chancellor George Osborne and by European officials and ministers, who were relieved Greece had been taken off the critical list for the time being.
On his way to an EU finance ministers’ meeting in Brussels, Mr Osborne said: “Of course, resolving the Greek situation is only part of resolving the eurozone crisis, but I think we took a really significant step towards that last night, and that is good for Britain, because resolving the eurozone crisis would be the biggest boost that Britain could get for its economy this year.”
The Chancellor said the deal was a major step towards securing debt sustainability in Greece. Permanent monitors from the EU, the International Monetary Fund and the European Central Bank will be placed on the ground in Athens to ensure there is no back-sliding, in what is an unprecedented intrusion into Greece’s sovereignty.
The deal will see Greece receive €130bn in loans through 2014 from other eurozone governments and the IMF. It’s the country’s second bail-out, following a €110bn rescue secured in 2010 failed to return the country to solvency.
The agreement also assumes that banks and investors owed money by Greece will take new bonds that reduce their holdings by more than half.
In return, Athens agreed to cut spending and wages, and to permit outsiders to supervise its finances through the presence of EU and IMF officials stationed in Greece.
It is hoped the measures will stop panic spreading across Europe, which would destabilise other debt-stricken countries, such as Ireland, Portugal, Italy and Spain.