ATHENS – Greece averted the immediate threat of an uncontrolled default on Friday when a sufficient number of private creditors agreed on a bond swap deal that will cut the country's public debt and clear the way for a new bailout.
Reuters reports that with euro zone ministers set to approve the 130 billion euro ($172 billion) rescue, French President Nicolas Sarkozy declared the Greek problem had been settled – just as Germany said that any impression the crisis was over “would be a big mistake.”
Financial markets sharply marked down the value of new Greek bonds to be issued to the creditors, reflecting the risk of paralysis after elections expected this spring and doubts about whether Athens can bring its debt to a more manageable level by 2020.
Sarkozy, who is trailing his socialist challenger for the presidency before France's own elections in April and May, pronounced the Greek deal a major success.
“Today the problem is solved,” he said in the southern French city of Nice. “A page in the financial crisis is turning.”
Euro zone finance ministers held a teleconference call and were expected to declare Athens had met the tough terms of the bailout, its second since 2010, and to authorize the release of funds which the country needs to meet heavy debt repayments later this month and avoid a disorderly default.
The International Monetary Fund's Managing Director Christine Lagarde said the IMF board next week would discuss a four-year loan worth 28 billion euros ($36.7 billion) to support reforms in Greece as part of the bailout package.
On the streets of Athens, some Greeks denounced the deal as a sham that would impose more crippling austerity on a people already enduring pay and pension cuts and soaring unemployment.
German Finance Minister Wolfgang Schaeuble was also in a more sombre mood than Sarkozy, issuing a warning to Athens which has a record of failing to meet its promises of reform and austerity made to international lenders.
“Greece has today got a clear opportunity to recover. But the precondition is that Greece uses this opportunity,” he told a news conference. “It would be a big mistake to give the impression that the crisis has been resolved. They have an opportunity to solve it and they must use it.”
Nevertheless, Greek Finance Minister Evangelos Venizelos hailed the bond swap, which the European Union and IMF had demanded in return for the new bailout, as marking a long-awaited success for all Greeks enduring a painful recession.
“I hope everyone will realize, sooner or later, that this is the only way to keep the country on its feet and give it the second historic chance that it needs,” Venizelos, who led often ill-tempered negotiations with the EU and IMF, told parliament.
He said the bond deal had cut its debt by 105 billion euros.
The Greek finance ministry said creditors had tendered 85.8 percent of the 177 billion euros in bonds regulated by Greek law.
This would reach 95.7 percent of all privately-held Greek debt with the use of “collective action claus