By Nick Mann | 13 December 2012
Eurozone finance ministers have formally approved a €49.1bn bailout of the Greek economy and also welcomed the preparations Cyprus is making for its own potential bailout.
The rubber-stamping of the Greek deal which was originally agreed last month means the debt-laden economy is now in line to receive €34.3bn in the next few days before the remainder is paid out in the first quarter of 2013.
Finance ministers today welcomed the result of this week’s Greek debt buy-back operation, under which holders of Greek debt agreed to sell €31.9bn of bonds back to the Greek government at 33.8% of their face value. The deal was required as a condition of the bailout, and even though it did not reduce Greece’s debt by as much as hoped for, the ministers – known as the Eurogroup – said it had led to a ‘substantial reduction’ of the country’s debt.
‘The Eurogroup reaffirmed that this, together with the initiatives agreed by the Eurogroup on November 27 and full implementation of the adjustment programme, should bring Greece's public debt back on a sustainable path, to 124% of gross domestic product in 2020,’ they said in a statement.
Unspecified ‘additional measures’ could be taken if necessary to ensure this goal is met, they added.
They also hailed Greece’s ‘strong commitment’ to carrying out the austerity measures required under the bailout, which would enable the country’s economy ‘to return to a sustainable growth path with higher employment’. ‘We strongly encourage the Greek citizens to sustain their efforts and to implement the necessary reforms,’ they said.
At the same meeting, the Eurogroup also said that progress had been made towards a possible bailout programme for Cyprus. The Mediterranean island is principally seeking funds to re-capitalise its banking sector, and the Eurogroup said the final results of a due diligence exercise aimed at identifying just how much money the banks require were expected in mid-January.
‘We are confident that agreement on the programme could soon be reached, and we call on the international institutions and Cyprus to finalise negotiations accordingly,’ they added.
Today also saw the finance ministers reach agreement on a single supervisory mechanism for banks in the eurozone – a key step towards creating a banking union in the single currency bloc. Under the mechanism, the European Central Bank will become responsible for supervising around 200 of the eurozone’s biggest banks.
European Commission president José Manuel Barroso hailed the agreement, which is expected to be backed by European Union leaders later today as a ‘crucial and very substantive step towards completion of the banking union’.
It was also a ‘timely step forward in the integration of financial supervision for the euro area and for the other member states which the Commission hopes will also participate’, he added.
