Greece, Europe Agree on Bailout to Avert Default

After months of wrangling and several missed deadlines by Greece, euro zone finance ministers finally reached accord on a new bailout for Athens that included additional austerity measures and cuts for private bondholders.

Reuters reported that a 13-hour session of talks resulted Tuesday in an agreement that would impose additional austerity measures on Greece, already five years into a deep recession, and compel private bondholders to accept additional losses. The bailout will allow Greece to avoid missing a critical bond repayment on March 20, which would trigger a default.

Still, the deal is regarded with skepticism as to whether it will actually allow Greece to avoid default in the long run but only postpone the inevitable. A report by the troika, the group made up of the European Union (EU), International Monetary Fund (IMF) and European Central Bank (ECB), said that Greece would need additional help, while its status would remain “accident prone” in years to come.

Elements of the agreement include a distribution by the ECB of profits from its purchases of Greek bonds to other nations, which could the use the funds to contribute to Greece’s rescue. The ECB had proposed such a measure last week. (The ECB also said Tuesday in a BBC report that, for the first time since August, it has bought no additional bonds from euro zone governments. In an effort to keep the cost of borrowing down for countries such as Spain, Italy and Portugal, the ECB has been buying their bonds in an ongoing purchase program.)