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| European Finance Ministers and I.M.F. Reach Agreement on Greek Bailout Terms | |
| (35 minutes later) | |
| BRUSSELS — Finance ministers from the euro zone and the International Monetary Fund patched up their differences over a bailout for Greece early Tuesday with a spate of measures bringing closer the release of long-delayed emergency aid. | BRUSSELS — Finance ministers from the euro zone and the International Monetary Fund patched up their differences over a bailout for Greece early Tuesday with a spate of measures bringing closer the release of long-delayed emergency aid. |
| The parties reached the deal after their third meeting in three weeks aimed at finding alternative ways of giving Greece relief in light of opposition by creditors like Germany and the Netherlands to so-called haircuts that would involve forgiving some Greek debt. | The parties reached the deal after their third meeting in three weeks aimed at finding alternative ways of giving Greece relief in light of opposition by creditors like Germany and the Netherlands to so-called haircuts that would involve forgiving some Greek debt. |
| The decisions “will certainly reduce the uncertainty and strengthen confidence in Europe and in Greece,” Mario Draghi, the president of the European Central Bank, said as he left the meeting. | The decisions “will certainly reduce the uncertainty and strengthen confidence in Europe and in Greece,” Mario Draghi, the president of the European Central Bank, said as he left the meeting. |
| For Greece, the agreement means euro zone ministers have unlocked loan installments totaling 43.7 billion euros ($56.7 billion). | For Greece, the agreement means euro zone ministers have unlocked loan installments totaling 43.7 billion euros ($56.7 billion). |
| Most of that money would start to be paid out in December, with further payments during the first quarter of next year on the condition that Greece continued to fulfill its pledges under the bailout plan. | Most of that money would start to be paid out in December, with further payments during the first quarter of next year on the condition that Greece continued to fulfill its pledges under the bailout plan. |
| During the talks, which lasted about 12 hours, the I.M.F. pressed ministers to agree that Greece’s debt should be cut by about 20 percent of G.D.P. through methods that include a debt buyback, lowering interest rates, lengthening the deadlines for debt repayments, and returning profits to Greece made on bonds bought by the European Central Bank. | During the talks, which lasted about 12 hours, the I.M.F. pressed ministers to agree that Greece’s debt should be cut by about 20 percent of G.D.P. through methods that include a debt buyback, lowering interest rates, lengthening the deadlines for debt repayments, and returning profits to Greece made on bonds bought by the European Central Bank. |
| In exchange, the I.M.F. compromised by loosening its debt target to about 124 percent of Greece’s gross domestic product by the end of the decade. The fund had been insisting on a target of 120 percent by 2020. | In exchange, the I.M.F. compromised by loosening its debt target to about 124 percent of Greece’s gross domestic product by the end of the decade. The fund had been insisting on a target of 120 percent by 2020. |
| Christine Lagarde, managing director of the I.M.F., emphasized at a news conference that agreement had also been reached to ensure Greek debt was “substantially lower” than 110 percent of G.D.P. by 2022. | Christine Lagarde, managing director of the I.M.F., emphasized at a news conference that agreement had also been reached to ensure Greek debt was “substantially lower” than 110 percent of G.D.P. by 2022. |
| The haggling has been going on against the background of a financial catastrophe unfolding in Greece, where the economy has shrunk by about one-fifth in three years and unemployment is hovering around 25 percent. The unrelenting gloom means suffering for the Greek public and also made it more improbable that the country can pay back its debts in full. | The haggling has been going on against the background of a financial catastrophe unfolding in Greece, where the economy has shrunk by about one-fifth in three years and unemployment is hovering around 25 percent. The unrelenting gloom means suffering for the Greek public and also made it more improbable that the country can pay back its debts in full. |
| The seemingly endless round of meetings over Greece has been a sign that after nearly three years of crises, the politicians are still trying to contain contagion in the euro zone, which began with a huge hole in Greek accounts, even as that country’s debt prospects continue to worsen. | The seemingly endless round of meetings over Greece has been a sign that after nearly three years of crises, the politicians are still trying to contain contagion in the euro zone, which began with a huge hole in Greek accounts, even as that country’s debt prospects continue to worsen. |
| In June, creditors froze aid from the current program, valued at 130 billion euros ($169 billion), after determining that Greece was failing to meet the conditions of that bailout, its second. Since then, “Greece has fully delivered its part of the agreement, so we expect our partners to deliver their part, too,” Yannis Stournaras, the Greek finance minister, said Monday before the meeting. | In June, creditors froze aid from the current program, valued at 130 billion euros ($169 billion), after determining that Greece was failing to meet the conditions of that bailout, its second. Since then, “Greece has fully delivered its part of the agreement, so we expect our partners to deliver their part, too,” Yannis Stournaras, the Greek finance minister, said Monday before the meeting. |
| But because of factors like worsening economic conditions, delays to fiscal reforms and disappointing earnings from the privatizations of state companies, Greek debt is now estimated at 175 percent of G.D.P., and its economy could shrink again, pushing that figure to 190 percent next year, and even up to 200 percent by 2014. | But because of factors like worsening economic conditions, delays to fiscal reforms and disappointing earnings from the privatizations of state companies, Greek debt is now estimated at 175 percent of G.D.P., and its economy could shrink again, pushing that figure to 190 percent next year, and even up to 200 percent by 2014. |
| The negative outlook has made calls by the I.M.F. that Greece pare its debt to 120 percent of gross domestic product by 2020 look unfeasible under current plans. That led the I.M.F. to increase pressure on major creditors like Germany to take politically unpalatable losses, or haircuts, on their holdings of Greek debt to keep the country in the euro zone. | The negative outlook has made calls by the I.M.F. that Greece pare its debt to 120 percent of gross domestic product by 2020 look unfeasible under current plans. That led the I.M.F. to increase pressure on major creditors like Germany to take politically unpalatable losses, or haircuts, on their holdings of Greek debt to keep the country in the euro zone. |
| The result had been a standoff, with Germany trying to keep the bill for Greece as low as possible at least until after the German elections in 2013. | The result had been a standoff, with Germany trying to keep the bill for Greece as low as possible at least until after the German elections in 2013. |
| Under the deal reached Monday, ministers laid out a range of options for making Greece’s debt more manageable — including lowering interest rates on bilateral loans made to Greece by 100 basis points. | Under the deal reached Monday, ministers laid out a range of options for making Greece’s debt more manageable — including lowering interest rates on bilateral loans made to Greece by 100 basis points. |
| The two sides took weeks to reach their deal because of conflicting views about how quickly Greece can grow its economy, lure investors, pay down its towering debt and return to the markets to borrow money once aid programs expire later this decade. | The two sides took weeks to reach their deal because of conflicting views about how quickly Greece can grow its economy, lure investors, pay down its towering debt and return to the markets to borrow money once aid programs expire later this decade. |
| Since June, the Greek economy has worsened and social problems in the country have become more acute as unemployment has climbed. Those factors have already led Greece’s lenders to agree that the government in Athens will need two years longer than previously agreed, or until 2016, to meet its budget targets. | Since June, the Greek economy has worsened and social problems in the country have become more acute as unemployment has climbed. Those factors have already led Greece’s lenders to agree that the government in Athens will need two years longer than previously agreed, or until 2016, to meet its budget targets. |
| But that concession will cost more money because of a range of factors, including revenues from privatizations that will not be as large as expected. The cost could come to nearly 33 billion euros ($43 billion) on top of existing bailouts to help Greece reach a primary budget surplus, which excludes debt repayments. | But that concession will cost more money because of a range of factors, including revenues from privatizations that will not be as large as expected. The cost could come to nearly 33 billion euros ($43 billion) on top of existing bailouts to help Greece reach a primary budget surplus, which excludes debt repayments. |
| The prospect of paying more to Greece perturbed some lenders, particularly Germany, where transferring more wealth to the poorer-performing economies of Southern Europe is politically risky, particularly as Chancellor Angela Merkel prepares for a re-election fight next year. | The prospect of paying more to Greece perturbed some lenders, particularly Germany, where transferring more wealth to the poorer-performing economies of Southern Europe is politically risky, particularly as Chancellor Angela Merkel prepares for a re-election fight next year. |
| Those concerns were on display over the weekend. Jörg Asmussen, a member of the European Central Bank’s executive board, told the German newspaper Bild that a write-down of Greek debt should not be part of the deal, echoing repeated statements from the German finance minister, Wolfgang Schäuble, who said it would be illegal. | Those concerns were on display over the weekend. Jörg Asmussen, a member of the European Central Bank’s executive board, told the German newspaper Bild that a write-down of Greek debt should not be part of the deal, echoing repeated statements from the German finance minister, Wolfgang Schäuble, who said it would be illegal. |
| On the other side was the I.M.F., which has insisted that fresh money, or even a write-down, will be needed to put Greece on a path to manageable debt by the end of the decade. By its own rules, the I.M.F. can lend money only if the debt is “sustainable” or can be paid back by a recipient country, like Greece. | On the other side was the I.M.F., which has insisted that fresh money, or even a write-down, will be needed to put Greece on a path to manageable debt by the end of the decade. By its own rules, the I.M.F. can lend money only if the debt is “sustainable” or can be paid back by a recipient country, like Greece. |