Today's Coming Crisis Movie

Saturday, July 23, 2011

Greece defaults, eurozone approves new bailout

Greece is the first eurozone member to default. However, leaders of the 17 members of the zone accepted that the controlled failure was the only option left to prevent the collapse of their currency and lead to another global financial crisis.

With the default, the leaders agreed to extend on Thursday another $229 billion (EUR 159 billion) bailout package from Europe, the International Monetary Fund and the private sector. It will be Athens’ second bailout after the $158 billion (EUR 110 billion) bailout extended to Greece in May.

The fresh funds are expected to reduce Greece’s debt by a quarter. Private lenders will also contribute $71.49 billion (EUR 49.6 billion) to the package in the next three years, which includes an $18.1 billion (EUR 12.6 billion) debt buy-back program.

European Council President Herman Van Rompuy, who disclosed the eurozone agreement, said the deal would stop the debt contagion from spreading and commits to improve the zone’s crisis management. Rompuy said the eurozone’s bailout fund, the European Financial Stability Facility, was given unprecedented powers of intervention and fundraising.

Under the agreement, Greece will be given different options to extend its repayment terms and reduce the amount of payment, allows the private sector to voluntarily participate in these options and also doubles the period of repayment terms for the Irish Republic and Portugal. (more)