Greek bankruptcy averted for now
European and global financial leaders have agreed to release €44 billion (US$57 billion) in critical loans to Greece and provide billions in additional debt relief in order to help the country stabilise its ailing economy.
After three weeks of negotiations, Greece's euro partners and the International Monetary Fund agreed early Tuesday morning to release the long-delayed payments and introduce measures - including a debt buyback programme and an interest rate cut on loans - which will reduce the country's debts by about €40 billion.
Greek Prime Minister Antonis Samaras hailed the agreement in Brussels early Tuesday as a victory that heralds "a new day for all Greeks". But the country continues to face years of economic pain as austerity measures, agreed as part of the bailout package, are implemented.
Most stock markets in Europe were modestly higher on the news out of Brussels.
The Stoxx 50 index of leading European shares was up 0.3 per cent, but the main stock index in Athens fell 0.3 per cent.
The euro also gave up earlier gains to trade 0.3 per cent lower at US$1.2949.
"There remains the potential for this deal to fall apart in the medium term, as there are a lot of moving parts and it is a long way away from the permanent fix that the IMF had been insisting upon," said Gary Jenkins, managing director of Swordfish Research.
"Instead, it is just one more big kick of the can down the road."
For three years, Greece has been struggling to convince markets as well as its creditors that it can get a grip on its public finances, which had spiralled out of control. The country is predicted to enter its sixth year of recession and is weighed down by an unemployment rate of 25 per cent.
The so-called troika of the European Central Bank, IMF and the European Commission has twice agreed to bail out Greece, pledging a total of €240 billion in rescue loans - of which the country has received about €150 billion so far.
In return for its bailout loans, Greece has had to impose several rounds of austerity measures and submit its economy to scrutiny.
The eurogroup and IMF agreed release €34.4 billion in loans originally scheduled for June to Greece in December, with the remainder issued in three instalments in the first quarter of 2013.
The money will be used to help recapitalise Greece's struggling banking industry and pay back suppliers, including its pharmacists which have gone for months without any payment from the Greek state welfare system.