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Eurozone crisis live: Greece’s second rescue package angers Greek opposition

Gruelling talks in Brussels ended in the early hours of this morning with agreement on a €130bn financial package for Greece
Opposition leaders call protests
From Dawn till Dawn – how the action unfolded
Today’s agenda

10.00am: My colleague Simon Goodley is taking over the blog now…. cheers all.

9.40am: Charles Dallara, head of the Institute of International Finance, is discussing the bailout deal now in Brussels.

He says he is “confident of strong participation in the voluntary debt deal”, adding that the plan agreed overnight will “propel” Greece to debt sustainability.

We’ll have more details from the briefing shortly.

9.25am: Economists and City experts are united this morning in expressing scepticism that Greece’s second financial package will work.

Sony Kapoor, managing director of Re-Define, an economic thinktank, is convinced that Greece will soon need a third bailout. He points out that Europe could have avoided much of this mess by imposing haircuts on private debt holders two years ago:

The mechanism for the contribution of profits on central bank holdings of Greek bonds is unnecessarily complicated and creates additional uncertainty and future potential disagreements. If haircuts had been imposed to private holdings of Greek bonds when debt restructuring was first discussed 2010, the situation for Greece would undoubtedly have looked significantly better now. One can’t help but get the feeling that everyone involved is going through the motions, doing what they feel they have to do, rather than what they want to or what they believe in. Confidence in the success of what has been agreed is rather low.

9.06am: Developments in Athens, where news of the historic accord is already being met with pledges of fiery resistance from the debt-choked country’s hardline leftist parties.

Helena Smith, our correspondent in Athens, reports:

Leading the pack is Greece’s unreconstructed communist party, the KKE, which made a fiery call to arms for people across Europe to join Greeks in their battle against “monopolies and profits” – the real guiding forces behind the latest rescue plan to save Athens from “supposed” economic Armageddon.

Aleka Papariga, the party’s fiery leader, immediately called a press conference for 1pm local time (11am GMT) where she is expected to outline a campaign of stepped up protests against the “medieval” cost-cutting reforms envisaged in the latest bailout accord.

The KKE, like other hardline leftist parties, has seen a dramatic rise in popularity on the back of opposition to austerity measures that have brought a growing number of Greeks to their knees. With general elections likely to take place in April, the communist party newspaper, Rizospastis (the Radical) quoted Papariga as saying the greatest need was “for the people to see the battle for power is now on the front line.”

Militant communist groups will kick off protests tomorrow with mass demonstrations in Athens and other cities to denounce emergency legislation that will further erode pensions and wages. The bill, one of many that Greece will pass by the end of the month under intense pressure to convince creditors of its willingness to enact reforms, is expected to be voted on by the 300-seat parliament late Wednesday.

“The IMF and EU express the desires of the ploutocracy and its parties. If workers and poor people accept these measures it it like they are accepting to sign their own sentence,” the KKE said in a statement. “Besides people have experience … from the first memorandum [outlining the conditions of Greece's initial bailout in May 2010] when barbaric measures, enforced for the salvation of the country, have made the lives of workers and low-income families wretched and have left them, and will continue to leave them, in a state of uncontrolled bankruptcy.”

The only way out of the crisis was to unilaterally write off Greece’s debt mountain.

“This is the only way to develop all the productive powers of the country,” the party said.

8.46am: We’re expecting more developments out of Brussels this morning. The Institute for International Finance (which represents Greece’s creditors) will be briefing the media shortly.

There’s also the latest UK public finances to look forward to, and bond auctions from Spain and the European Financial Stability Fund.

Here’s today’s agenda:

• IIF holds press conference on Greek package – am
• UK public finances for January – 9.30am GMT
• Spain holds bond auction – 9.30am GMT / 10.30am CET
• EFSF bond auction – 11am GMT / noon CET
• Euro-Zone consumer confidence data – 3pm GMT

8.37am: Despite the deal being ‘agreed’ as dawn crept over Brussels, the Greek financial package must still clear a few hurdles.

One potential obstable is that several Eurozone parliaments, including the German Bundestag, must give their approval. Germany’s Wolfgang Schäuble declared this morning that this vote would pass with ease, telling Deutschlandfunk radio station that:

I am very confident.

Schäuble also explained that the European Commission’s team of experts in Greece would be beefed up, giving it more powers to monitor its economic reform packages:

We agreed with the Commission that [its] team in Greece should be considerably strengthened…It is about surveillance but also, of course, about helping Greece.

8.16am: In the City, the FTSE 100 reacted to developments overnight by dipping in early trading. It’s currently down 18 points at 5928, a drop of 0.3%. There’s no sign of euphoria on other European exchanges either. Most are slightly lower, with the German DAX around 0.34% lower.

Michael Hewson of CMC Markets said the muted response was partly due to te Troika’s warning about Greece’s debt sustainability (see 7.52am). Hewson warned that the report:

laid bare the problems facing the Greek economy, and it now rests on whether markets think the program is even remotely credible, or achievable for that matter, as Greece seeks to rebuild its broken economy.

While the package may buy more time it remains highly debateable whether it will achieve the measures it is designed to, given the magnitude of the problems in the country.

8.04am: The overnight negotiations in Brussels did not end well for the Dutch finance minister. Jan Kees de Jager returned to his hotel room around 6.30am local time, to find he was locked out. De Jager disgruntedly tweeted that this was no reward for 14 hours at the negotiating table:

Heb je net 14 uur vergaderd tot diep in ochtend in Brussel heeft hotel mijn pasje geblokkeerd. Kennelijk half zeven in ochtend te laat :-(

— Jan Kees de Jager (@JCdeJager) February 21, 2012

Yesterday, De Jager led calls for the troika to be given a permanent presence in Athens, so there’s something ironic that he wasn’t able to get a temporary presence in his own hotel room.

However, there are already concerns that EU ministers are taking crucial decisions in the middle of the night when people are worn out. Having finance ministers hanging around hotel receptions after draining all-nighters isn’t ideal.

7.52am: The other important development last night was the publication of the troika’s latest report on Greece’s debt sustainability.

The nine-page report, which can be downloaded here, found that “additional debt relief” was needed to bring Greece’s debt back into line.

Otherwise, the troika’s officials warned, Greece was on track for an unsustainably high debt-to-GDP ratio of 129% by 2020, which could rise to 160% in the worst case scenario.

The deal agreed in Brussels will, the eurogroup says, get that debt-to-GDP ratio down to 120.5% in eight years. But the troika’s report has still caused alarm, as it paints such a stark picture of Greece’s problems. For example:

The 2011 outturn was worse than expected, both in terms of growth and the fiscaldeficit; the macroeconomic outlook has deteriorated significantly, due to events in Europe; the fiscal outlook has deteriorated due to the economy and due to delays indeveloping fiscal-structural reforms

This report, the Financial Times suggests this morning, explains why some European countries were so opposed to the new financing programme for Greece. In an article headlined “Greek debt nightmare laid bare“, it said:

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.

7.45am: Here’s a summary of what was announced in Brussels overnight:

Eurozone finance ministers agreed the details of a €130bn financial package for Greece

The deal, it says, will cut Greece’s debt-to-GDP ratio to 120.5% of GDP by 2020, in line with previous targets. This will be achieved by private creditors taking a deeper cut on their existing Greek bonds, of 53.5% of their face value (from 50% before). The European Central Bank will also contribute, by passing the profits from its Greek bondholdings onto the national central banks, who will then pass it onto Greece.

Greece will now begin negotiations with its private creditors over the terms of the package. It also appears that the Athens parliament plans to pass laws tomorrow to force losses onto bondholders who decline to take part in the ‘voluntary’ scheme.

The deal was welcomed by all sides in Brussels, with Greek PM Lucas Papademos calling it a ‘historic’ moment and Christine Lagarde arguing it would give Greece the opportunity to return to growth.

But the eurozone is also demanding tougher oversight of Athens, suggesting that the troika will be much closer involved in Greece’s decisions in future.

7.40am: Good morning, and welcome to our rolling coverage of the eurozone debt crisis.

In the past three hours, Eurozone finance ministers have reached an agreement on Greece’s second financial programme. Following gruelling talks in Brussels overnight, the eurogroup arrived at a deal that should keep Greece from default next month.

But the country’s long-term future remains worrying, after a leaked copy of the troika’s latest report on Greece’s debt refinancing showed that the country is mising its targets.

We’ll be bringing you all the reaction and analysis of the deal. In the meantime, the live blog we began yesterday morning shows how events unfolded overnight.

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