Greece bailout package signed off by EU leaders

Spain's PM Rajoy speaks during a campaign rally in Almeria. Spain is under pressure to meet EU targets. Photograph: Francisco Bonilla/REUTERS

Eurozone finance ministers have signed off on a second Greek bailout package, worth €130bn (£109bn), and turned their attention to Spain.

Greece slashed its debts by more than €100bn in the last few days by swapping its privately held bonds for new, longer maturity paper with less than half the nominal value. The debt exchange paved the way for eurozone ministers to give the final nod to the latest rescue package for Athens, pending discussions about the International Monetary Fund's €28bn contribution on Thursday, as well as national votes. The eurogroup's decision, taken in Brussels on Monday night, will be formalised by junior officials on Wednesday.

Luxembourg's prime minister, Jean-Claude Juncker, who chairs the eurogroup of eurozone finance ministers, said last night: "As agreed, new official financing of €130bn will be committed by the euro area and the IMF for the period 2012-2014."

Thanks to a high take-up of the bond swap offer, Greece's debt is now expected to fall below a target of 120% of GDP in 2020, reaching 117%, from 160% today, he added.

Economic affairs commissioner Olli Rehn went on to say the success of the Greek programme would hinge on implementation risks and political unity in Greece – "an enormous caveat if ever there was one with elections coming up on 15 April, and with the two main parties lagging badly in the polls", noted Michael Hewson, senior market analyst at CMC Markets UK.

With the ink barely dry on the Greek debt agreement, lawyers in Germany representing 110 Greek bondholders are launching a class action suit to sue banks and the Greek state.

As the ministers gathered in Brussels they swiftly turned their attention to Spain, which admitted that it would miss its budget deficit target for this year. As the country heads back into recession, Spain – Europe's fourth-largest economy – will only cut its deficit to 5.8% of GDP, rather than the 4.4% goal imposed by Brussels. In 2011, the shortfall came in at 8.5%, far above the 6% target.

The eurogroup asked Spain to aim for a 5.3% deficit target this year. "The Spanish government expressed its readiness to consider this in the further budgetary process," it said.

Juncker added: "It will be the responsibility of the Spanish authorities to choose the initiatives that will have to be taken in order to bring down the budgetary deficit in 2012, what is most important is what is the target for 2013. What is less important, but nevertheless important, are the avenues chosen in 2012."

source:http://www.guardian.co.uk/business/2012/mar/13/greece-bailout-package-signed-off