21 Oct 2011

Eurozone agrees £8bn bailout for Greece

Eurozone finance ministers agree to pay Greece its next bailout loans to avoid a potentially disastrous default.

Eurozone agrees £8bn bailout for Greece (getty)

The loans still need the approval of the International Monetary Fund (IMF) but should be delivered during the first half of November.

The 17 finance ministers acknowledged that Greece’s substantial debt still remained too high, but said they were looking at ways to cut it, possibly by imposing bigger losses on the banks that hold Greek bonds.

If those debts aren’t reduced, Greece will be unable to raise money on the financial markets for another ten years, according to a new report by the country’s international creditors.

The markets seemed to have confidence in the decision taken by the 17 eurozone ministers, and stocks and the euro traded substantially higher after the announcement on Friday.

“Sacrifice” of Greek people

Greek Finance Minister Evangelos Venizelos, welcomed the news that Athens would receive the next euro 8bn installment, calling it a “positive step”.

“The great sacrifices of the Greek people and the implementation of tough but nationally necessary rescue measures are the basis, not only for the sixth tranche, but for the new program that will ensure the long-term viability of the Greek public debt,” Mr Venizelos said.

The previous day, Greece had approved new austerity measures, that were strongly opposed by the public.

The eurozone ministers also met in Brussels to discuss boosting the eurozone’s 440bn euro bailout fund, to keep Italy and Spain from losing control and forcing weak banks to boost their capital.

Europe’s leaders have already told the G-20 that it will be early November – their next meeting in Cannes – before they have a plan ready.

But Jean-Claude Juncker, prime minister of Luxembourg and chair of the eurozone finance ministers, said the announcement to delay all decisions until the next summit looked “disastrous” to the outside world.