Greece hails 'historic' EU deal, critics warn of cuts
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(ATHENS) - Greek authorities on Thursday hailed a late-night EU deal slashing the country's huge debt as "historic" but critics warned of new sacrifices lying in store under the watchful eye of Brussels.
The Athens stock exchange jumped 4.32 percent in afternoon trade after eurozone leaders agreed to slash Greece's debt of over 350 billion euros ($487 billion) by nearly a third.
"The country has signed a very major deal, this is a historic day that can put order in our public finances," government spokesman Elias Mossialos told Mega television.
Prime Minister George Papandreou will brief President Carolos Papoulias, hold a cabinet meeting and give a 1500 GMT televised address to the nation on the results of the summit, his office said.
Speaking to reporters in Brussels hours earlier, Papandreou said Greece had "escaped the trap of default," which he termed a "question of survival" for the country.
But main opposition leader Antonis Samaras said the government was boasting for no reason.
The EU deal "proves that the government's policy was wrong," he said in a televised address of his own.
"The (debt) 'haircut' will bring the country's debt ratio to 120 percent of output in 2020, which is where it was in 2009," Samaras said.
"Those who celebrate about bringing the country back to 2009 in 2020 should get serious ... the government responsible for a shipwreck should not speak of salvation," he said.
The deal brokered early Thursday will cut 100 billion euros off Greece's debt mountain thanks to an agreement between the eurozone and private sector creditor banks to take a 50-percent loss on their holdings of Greek government bonds.
The deal should help cut the ratio of Greece's debt from 160 percent of gross domestic product (GDP) to 120 percent by 2020, still above the EU limit of 60 percent but much more manageable if the economy can be made to grow again.
Papandreou noted that the details would still have to be negotiated and concluded "by the end of the year" to enable Greece to finalise budget plans.
Already weakened by the crisis and shut out of the financial markets, not all Greek banks will be able to weather the increased cost smoothly and Papandreou admitted some could pass under temporary state control.
"It is very likely that a great part of bank shares will come under Greek state control," he told reporters in Brussels.
"After restructuring, these shares will be made available on the market as other countries have done," he said.
The prime minister was careful to stress that Greek pension and social insurance funds, already under strain from chronic contribution dodging and rising jobless benefits during a biting recession, would be safe.
"The insured and pensioners can be sure about their funds and pensions," he said.
The eurozone leaders also agreed a new bailout to replace the 109 billion euros in aid loans agreed in July. It would be worth up to 100 billion euros until 2014 and should be agreed by the end of the year.
"Haircut deal brings relief but also obligations," top-selling Ta Nea daily headlined on Thursday, noting that Greece had agreed to "painful" pledges including "multi-year austerity, a more intensive supervision and a wide privatisation programme."
Former conservative finance minister Stefanos Manos argued that Greece's decision to cut its debt would haunt it for years to come.
"I am sorry and ashamed that the Greek government has opted to welsh on our creditors. This decision will haunt us for years. Let's see how easy it will be to secure loans in future," he told Flash Radio.
Manos also belittled the proposed debt reduction.
"The debt ratio was at 120 percent when Papandreou took power. He brought it to 150 percent and now there is hope that it will go back down to 120 percent by 2020?" he said.
Waves of general strikes and protests, some of them violent, have been held against the wage cuts, pension reductions and tax hikes that have spearheaded the government's economic reforms this far.
Unions have warned of more labour unrest to come early next month, with the two main groups announcing a November 1 meeting to coordinate further action.