Euro zone finance ministers struck a deal early on Tuesday for a second bailout program for Greece that will involve financing of 130 billion euros and aims to cut Greece's debts to 121 percent of GDP by 2020, EU officials said.Deal Won't Hold
"The financial volume (of the Greek package) is 130 billion euros and debt-to-GDP (will be) 121 percent. Now it's down to work on the statement," one official involved in the negotiations told Reuters.
Another official confirmed that the financing would total 130 billion euros with the aim of reducing Greece's debts from around 160 percent of GDP now to 121 percent by 2020.
Even if true, the deal won't last. It may not even last a month. In fact, it may be nothing but a setup to convince Greeks to leave their money in banks.
Greek Debt Nightmare Laid Bare
Please consider Greek Debt Nightmare Laid Bare
A ?strictly confidential? report on Greece?s debt projections prepared for eurozone finance ministers reveals Athens? rescue programme is way off track and suggests the Greek government may need another bail-out once a second rescue ? set to be agreed on Monday night ? runs out.We are supposed to believe all of that has been magically fixed?
The 10-page debt sustainability analysis, distributed to eurozone officials last week but obtained by the Financial Times on Monday night, found that even under the most optimistic scenario, the austerity measures being imposed on Athens risk a recession so deep that Greece will not be able to climb out of the debt hole over the course of a new three-year, ?170bn bail-o
It warned that two of the new bail-out?s main principles might be self-defeating. Forcing austerity on Greece could cause debt levels to rise by severely weakening the economy while its ?200bn debt restructuring could prevent Greece from ever returning to the financial markets by scaring off future private investors.
A ?tailored downside scenario? in the report suggests Greek debt could fall far more slowly than hoped, to only 160 per cent of economic output by 2020 ? well below the target of 120 per cent set by the International Monetary Fund. Under such a scenario, Greece would need about ?245bn in bail-out aid, far more than the ?170bn under the ?baseline? projections eurozone ministers were using in all-night negotiations in Brussels on Monday.
The report made clear why the fight over the new Greek bail-out has been so intense. A German-led group of creditor countries ? including the Netherlands and Finland ? has expressed extreme reluctance to go through with the deal since they received the report.
Mike "Mish" Shedlock
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