EU leaders agree £96bn Greek bail-out
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European leaders have agreed a £96bn bail-out of Greece.
The deal will see private lenders forced to contribute £32.7bn to the aid package which is designed to give Greece a longer time frame to repay its debts.
According to reports, the deal is expected to lead to the first default on eurozone bonds since the creation of the single currency.
The agreement also includes a commitment from European leaders to support the country until it is able to return to the financial markets. The FT says that at a meeting in Brussels on Thursday, eurozone leaders agreed on a three-year programme that would target £32.7bn in bondholder commitments to swap or rolllover their debt for new bonds that would mature in 30-years. An additional £11bn is expected to come from bond owner commitments to sell their holdings at a reduced price as part of a bond buyback programme.
The terms of the deal imply a loss to Greece’s lenders equivalent to 21 per cent of the market value of their debts, said the Institute of International Finance.
The restructuring is widely expected to be declared by credit rating agencies to be a default by Greece on its debts. The eurozone leaders said the bondholder programme would be limited to Greece, calling it “an exceptional and unique solution”.
The leaders have also announced an overhaul of the £389bn bail-out fund in a bid to ease the terms of the rescue loans. The move will see Greece, Portugal and Ireland have rates cut to about 3.5 per cent and they will not have to repay the loans for up to 30 years. There will also be an ability for the bail-out fund to help countries not in a bail-out situation but those in need of precautionary credit lines.
The news saw a small rise in markets in early morning trades. At 8.18am the FTSE100 was up 0.51 per cent at 5930.
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