Greece has deal after lenders accept losses

BRUSSELS, Feb. 21 (UPI) -- The eurozone approved a $172 billion Greek bailout Tuesday after strong-arming private holders of Greek bonds to take steeper losses than they'd earlier agreed.

"We have reached a far-reaching agreement on Greece's new program and private-sector involvement," Luxembourg Prime Minister Jean-Claude Juncker, who heads the eurozone finance ministers when they meet as a group, said after nearly 14 hours of talks.

The news was greeted favorably in Washington by the Obama administration, with White House press secretary Jay Carney telling reporters "the Europeans have taken important steps to deal with the crisis."

"It also remains the case that additional steps should be taken and we encourage our ... European friends and allies to take those steps to strengthen the firewall, to ensure that the reforms that have been taking place in -- in countries within the eurozone are -- are furthered and carried out in a way that helps ease the situation," Carney said.

"So progress still needs to be made. And ... we will continue to work with our European friends and allies to do that and to offer advice and counsel based on our own experience with these kinds of issues. As you know, certainly, [Treasury] Secretary [Timothy] Geithner has spent a lot of time in recent months interacting with his counterparts in Europe discussing these ... various issues, and ... offering his perspective based on his experience here in the United States."

Under the bailout terms, finalized after 5 a.m. local time (11 p.m. EST Monday), Greece will cut its debt to about 120.5 percent of its gross domestic product by 2020, from about 160 percent now.

But reaching this figure took so long because a confidential debt analysis showed that under a previously negotiated deal, Greece's debt would only lower to 129 percent, rather than 120 percent, which the International Monetary Fund said was needed, the Financial Times reported.

"Everybody understood that this was the moment of truth," Belgian Finance Minister Steven Vanackere said.

After several rounds of tough talks, representatives of banks that hold Greek bonds, who agreed in October to take a 50 percent loss on the face value of their bonds, agreed to add to their losses and take a "voluntary" 53.5 percent face-value loss, officials said.

This is the equivalent to an overall loss of about 75 percent instead of the earlier equivalent of about 70 percent, officials said.

The greater losses are expected to lower Greek debt levels to 120.5 percent by 2020, officials said, which is close to the IMF figure for long-term debt sustainability.

In addition, Greece will pay lower interest rates on its bailout loans and eurozone countries' central banks agreed to give up profits from Greek bonds bought at a discount and to pass those gains back to Athens, The New York Times reported.

European Central Bank President Mario Draghi called the deal "a very good agreement."

The loan package is needed to avert a Greek government default. Athens must pay off $19.2 billion in maturing bond debt March 20 and cannot pay the money without foreign help.

Economists and politicians had said a Greek bankruptcy would have disastrous effects, spreading like a contagious disease to Portugal, Italy and possibly other countries.

The bailout is to be Greece's second in two years. Eurozone countries and the International Monetary Fund agreed to a first aid package -- a $146 billion loan conditional on Greece executing harsh austerity measures -- in May 2010.

The latest bailout brings to $513 billion the amount given Greece, Ireland and Portugal to save them from bankruptcy.