Greek Leaders Reach Austerity Deal

Greece has reached an agreement with international lenders on a package of austerity measures, clearing the way for a swap to cut the nation’s debt and win its second bailout in two years.

Hot Feature: Investors Wake Up to the Return of Dividends

European Central Bank President Mario Draghi confirmed rumors on Thursday that a deal had been reached after he received word from Greek Prime Minister Lucas Papademos himself. Draghi appeared at the bank’s monthly press conference on monetary policy in Frankfurt, where he said, “An agreement has been endorsed by the major parties.” An announcement from Papademos’s office is expected shortly.

His comment came in response to a question posed about whether the central bank would accept losses on its holdings of Greek government bonds as a means of stabilizing the country’s finances. Though Draghi would not comment on that issue, he said that a “full report on the agreement and a discussion of further steps” would be released later in the day.

Original reports this morning showed talks over austerity measures to have stalled when Greek party leaders disagreed with the so-called troika — the European Commission, European Central Bank, and International Monetary Fund — over pension reform.

The accord comes less than four hours before euro-zone finance ministers are set to meet in Brussels to discuss the 130 billion-euro bailout and the swap that will impose a 70 percent loss on private investors. Without a deal, international lenders threatened not to release the rescue funds, which would almost certainly have resulted in default a default for Greece.

The aim of the debt swap is to reduce Greece’s debt burden to 120 percent of gross domestic product by 2020, from 160 percent this year, by having private creditors accept an average coupon of as low as 3.6 percent on new 30-year bonds in exchange for their existing bonds.

A formal debt swap offer must be made by February 13 if legal paperwork is to be completed in time for the rescue funds to be released ahead of a 14.5 billion-euro bond repayment on March 20.

Don’t Miss: Jobless Claims Fall Another 15K

To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com