Eurozone leaders reach Greek debt agreement
Banks and private investors to contribute to second bailout of $156bn to help the country avert financial meltdown.
Last Modified: 21 Jul 2011 16:07

Al Jazeera's Jonah Hull, reporting from Brussels, discusses the details of the second bailout package for Greece

Eurozone leaders have agreed in a crucial summit to find a way out for Greece to manage its debt crisis.

Together with the International Monetary Fund, eurozone countries will give Greece a second bailout worth 109bn euros ($156bn).

Banks and other private investors will also contribute about 37bn euros ($53bn) to the rescue package. The new bailout will supplement the $146bn rescue plan for Greece launched in May last year.

One key element of the package is an expansion of the role of the European bailout mechanism, the European Financial Stability Facility (EFSF), so it can act more freely.

On the agenda of Thursday's summit in Brussels was the idea of emergency loans for Greece and overhaul of the eurozone's bailout fund in an attempt to stop the debt crisis from engulfing larger countries like Spain or Italy.

A draft document was discussed by the eurozone leaders which stated that private creditors could agree to contribute to a second rescue package for Greece.

"Today we reached three important decisions fully supported by all of us, we improved Greek debt sustainability, we took measures to stop the risk of contagion and finally we committed to improve the euro zone's crisis management," Herman Van Rompuy, the European Council president, said.

Loan maturities

According to the draft agreement, the eurozone was ready to extend the average maturities for Greece's official loans to 15 years, at an interest rate of 3.5 per cent.

"We have decided to support Greece as a member of the euro and the eurozone. It is a determined commitment," Nicolas Sarkozy, the French president, said as leaders emerged from the summit.

"All the euro countries have decided to be at its side."

The Greek prime minister, George Papandreou welcomed the agreement, saying: "We now have a programme and a package of decisions which create a sustainable path for Greece, a sustainable debt management for Greece."

Greece will adopt the measures involved as it will be in their interests, Al Jazeera's Jonah Hull says, ''Greece will be able to deliver the loans more widely and cheaper.'

Global stock markets earlier in the day increased their values as reports that a provisional deal could be reached in the Belgian capital to tackle the eurozone debt crisis.

The Milan stock exchange rose by four per cent while the Spanish market gained three per cent. US shares also opened sharply higher.

Merkel-Sarkozy meeting

The Brussels summit began hours after Germany and France, the eurozone's two largest economies, reached a common position on the second Greek bailout.

The accord came after seven hours of talks late into Wednesday night between German Chancellor Angela Merkel and Sarkozy in Berlin.

Jose Manuel Barroso, the head of the European Commission, warned on Wednesday that the global economy would suffer if Europe could not summon the political will to act decisively on Greece.

"Nobody should be under any illusion: the situation is very serious. It requires a response, otherwise the negative consequences will be felt in all corners of Europe and beyond," he said.

Commenting on the agreement that has been made late into Thursday night, Barosso said "this is the first time since the beginning of this crisis that we can say the politics and the markets are coming
together, we have now a very credible package.

Al Jazeera and agencies
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