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From the markets: Breakthrough in Brussels - green light for second Greek bailout package

February 21, 2012
Finance ministers of the euro group agreed on the second bailout for Greece of EUR130 bn (USD173 bn) and private bondholders will accept a higher haircut of 53.5% on the nominal value of their bonds.

Before they had agreed to a 50% nominal write down that equated to around a 70% loss on the net present value of the debt. The measures aim to cut Greece's debt to 120.5% of gross domestic product by 2020 from currently more than 160%. Furthermore, the European Central Bank will distri-bute its profits from bond buying. According to euro group head Jean-Claude Juncker, “euro zone finance ministers have reached a far reaching agreement on Greece's new program and private sector involvement that would lead to a significant debt reduction for Greece and secure Greece's future in the euro are.” However, while the euro group statement spoke of a “significant contribution” from the IMF to the bailout plan, it was unclear whether the fund would stick to its practice of delivering a third of the funds, like it did for the first Greek bailout program.