Greece has been given a temporary reprieve to its spiraling debt crisis after European leaders last night agreed on a 996 billion kroner bailout package that saves the country from bankruptcy.
The bailout arrived after almost 13 hours of negotiations during which it was agreed on how to reduce Greece’s debt to 120.5 percent of GDP, rather than the projected 160 percent, by 2020.
The cut in debt was reached by convincing private debt holders to accept further losses. Without reaching the 120 percent mark, the International Monetary Fund would not have helped fund the bailout.
The deal will require Greece to implement further austerity measures, consisting of tax hikes and cuts to social services, which some experts have argued will only further depress the Greek economy. After previous rounds of austerity measures were implemented, Greece’s GDP shrank by seven percent in the last quarter.
But after the deal was reached, Denmark's minister of the economy and interior, Margrethe Vestager, argued that strict terms were to be expected when taking a loan.
“There are always conditions, even for ordinary people, when accepting large loans,” Vestager said yesterday in Brussels. “They also need to accept some tough conditions from their loan givers. Greece is not being forced to do anything. Neither I, nor the Eurogroup, are choosing anything on behalf of the Greeks. Greek politicians could say no if they wanted to. They are accountable to their voters at the election in April.”
But it is precisely this election which some commentators have warned could derail the entire deal, with at least one opposition party indicating they would resist the bailout package.
Impatience with Greece has also been mounting across Europe, with German finance minister Wolfgang Schäuble recently stating that Germans were getting tired of pouring money into a "bottomless pit".
Without the bailout package, Greece would default on their debt and destabilize the European banking sector, a scenario that European politicians are so keen to avoid that they are willing to spend almost a trillion kroner to avoid it.
In Paris on Monday, PM Helle Thorning-Schmidt met with French president Nicolas Sarkozy, after which she admitted that the sovereign debt crisis was placing pressure on Denmark as the current holder of the rotating EU Presidency.
“No one is going to say it’s easy to be the president right now,” Thorning-Schmidt said. “The point now is to make sure that we make constructive and forward-thinking decisions which will improve Europe’s growth.”
Thorning-Schmidt added that European leaders did have faith in a Greek recovery and that the new bailout package for Greece would work and allow the Greeks to regain control over their economy.
“It’s been good for both us and Greece that we have had a good cooperation about the Greek economy,” she said.
