Greeks greet debt deal with relief, but dread sacrifices ahead

The EU agreed to give Greece a $170 billion bailout, rescuing the country from a default next month. But after five years of recession, the economic outlook is still not promising.

John Kolesidis/Reuters
A man makes his way during a rainy day in front of the parliament in Athens, last week. Greeks greeted with relief the news on Tuesday that their country will avoid a default next month.

Greeks greeted uneasily the news on Tuesday that their country will likely avoid defaulting on its debts next month and the euro should remain their currency – at the cost of years of economic hardship.

The relief engendered by the 17-nation eurozone's decision to back a new €130 billion ($170 billion) rescue was offset by a grim reality: Greece faces many more years of sacrifice, on top of a grueling 24 months of austerity measures that have contributed to record high unemployment and a rapidly contracting economy.

"I don't see (the agreement) with any joy because again we're being burdened with loans, loans, loans, with no end in sight," Athens architect Valia Rokou said.

The deal in Brussels gives Greece its second financial lifeline in less than two years and the hope is that it will grant the country the breathing space to enact widespread reforms and set it back on a path to growth.

Greece has been surviving since May 2010 on a first €110 billion ($146 billion) batch of loans from the eurozone and the International Monetary Fund.

Some Greeks noted that despite the gloomy future, the rescue deals lightened the immediate financial uncertainty looming over the country.

"Everyone was depressed ... This news gives me great joy," said Christos Kontogeorgis, a pensioner in the capital.

As well as securing another deal with its European partners and the IMF, Greece is hoping to get its private creditors to agree a massive writedown in the holdings of their Greek debt. Banks, pension funds and other private investors are being asked to forgive some €107 billion ($142 billion) of the total €206 billion ($273 billion) in devalued Greek government bonds they hold.

Private bondholders will trade their bonds with new ones carrying much longer maturities and lower interest rates – an annual 2 percent by 2015, 3 percent to 2021 and 4.3 percent after that.

"It's not every day that €100 billion in public debt is written off, or loans for €130 billion agreed," Ta Nea newspaper said in an editorial. "There will be new sacrifices and difficulties, particularly for middle and lower earners. We must hope that this new period will become an opportunity for growth and better prospects."

The head of the conservative New Democracy party, the junior partner in Greece's interim coalition government, said the deal buys Greece time and hope of recovery.

"Greece is in pain and the people is suffering, therefore this is no time for jubilation," Antonis Samaras said during a visit to Cyprus.

Greece is in a fifth year of recession, with the economy forecast to shrink 4.5 percent this year before starting to expand again in 2014 – although by then it will have contracted by more than 17 percent since the beginning of the crisis in 2009. Unemployment is at 21 percent, with one in two workers under 25 out of a job.

Majority Socialist leader George Papandreou urged Greeks "to continue the fight we have started, despite the huge price, and not abandon the effort halfway through."

Without either aspect of Tuesday's agreement, Greece would have soon been forced to default on its debts – halting pension and civil servant salary payments. In all likelihood, Greece would have had to leave the common European currency it joined in 2001.

"I feel relieved to start with, because my country has escaped the immediate danger it faced," said Athens lawyer George Sabalos, 40. "But I'm also troubled by our partners' demand that the country's constitution should be modified as part of the guarantees they are seeking, because I believe that is a rather excessive demand that goes against the principle of solidarity."

And Greek unions fiercely oppose further austerity measures that accompany the second bailout, and have called a protest rally outside Parliament in central Athens on Wednesday.

Prime Minister Lucas Papademos has called a cabinet meeting to discuss the additional cutbacks, which will be included in emergency legislation to be tabled later Tuesday. The draft law will force private sector employees to accept further salary cuts as a result of the minimum €751 ($996) monthly wage being cut by 22 percent, and further cut pensions.

"Workers in our country refuse to accept the barbarity of the tougher neoliberal measures that have been extortionately imposed by our creditors, and that is why they will continue and step up their struggle ... to block the destruction of our society," the main GSEE private sector union said in a statement Monday.

GSEE and its public sector counterpart, the ADEDY, have staged a series of general strikes over the past two years. Many have turned violent, and as Greek lawmakers debated new austerity measures on Feb. 12 extensive rioting saw dozens of businesses in central Athens burnt and looted.

Three workers died in an Athens bank torched by rioters during a protest in May 2010.

Greek stocks opened lower Tuesday, and were nearly 2.0 percent down in early afternoon trading. However, they've been enjoying big gains over recent weeks on the expectation that the bailout would be secured.

Menelaos Hadjicostis in Nicosia contributed.

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