European leaders agree on 2nd Greece rescue deal

An emergency summit of leaders of the 17-nation currency area on Thursday pledged to conduct a second bailout of Greece with an extra 109 billion euros ($157 billion) of government money, plus a contribution by private sector bondholders estimated to total as much as 50 billion euros by mid-2014.

The leaders also made detailed provisions for limiting the damage if, as seems likely, credit rating agencies declare Greece to be in temporary default - the first such event in the 12-year history of the euro.

The package boosted stocks and the euro because it suggested for the first time since the Greek debt crisis erupted early last year that the eurozone was taking a comprehensive, long-term approach to the problem, rather than simply lending Greece more money to avoid disaster in the near term.

"We have thus sent a clear signal to the markets by showing our determination to stem the crisis and turn the tide in Greece, thereby securing the future of the savings, pensions and jobs of our citizens all over Europe," Dutch Prime Minister Mark Rutte said.

But some of the details remained sketchy and doubts lingered about whether the plan went far enough to assure not only Greece's debt sustainability but that of Ireland, Portugal and other debt-burdened nations.

The package yielded "more than expected but not enough to make us sleep comfortably", Barclays economists said. They were disappointed that European leaders did not agree to expand a eurozone rescue fund. If market conditions deteriorate and a larger European economy - Italy, for example - struggles to shoulder its debt burden, the rescue fund could be quickly wiped out.

French President Nicolas Sarkozy said measures agreed at the summit would together reduce Greece's debt by 24 percentage points of gross domestic product from about 150 percent at present.

Reuters

(China Daily 07/23/2011 page8)