Greek bailout deal satisfies George Osborne

Chancellor welcomes £100bn rescue package agreed by eurozone finance ministers, but Alistair Darling is sceptical

George Osborne has welcomed the £100bn deal thrashed out by eurozone finance ministers to bail out Greece, saying it would allow Europe to move on.

The chancellor acknowledged Greece would face difficult decisions, but said he did not think it had any other option.

His comments as he arrived for an EU finance ministers' meeting in Brussels came as his Labour predecessor, Alistair Darling, expressed scepticism about the prospect of the deal resolving the eurozone's financial crisis, saying: "It does not get you out of the woods at all."

Osborne said: "I think the important thing about this deal is that they have tried to get Greece into a reasonable place vis-a-vis its debt sustainability.

"That's been the crucial missing ingredient. They have not, in the past, come up with a sustainable position for Greece. I think they have made real progress now towards giving a sustainable debt position for Greece.

"Of course the Greek people, the Greek political system, has to deliver really difficult decisions now but I don't think Greece has any other option.

"The other significant point about last night's deal was that the rest of the eurozone signalled a willingness to stand behind their currency and stand behind Greece and, frankly, all along the failure to deal with the Greek situation has caused uncertainty. Hopefully we can all move on now and get the European economy growing."

Nick Clegg, the deputy prime minister, said he hoped the Greek bailout thrashed out overnight would be a lasting solution.

Eurozone finance ministers finally approved the terms of a second rescue package for Greece worth €130bn (£108bn), which should avert the risk of a Greek default next month.

The deal was hammered out in Brussels during more than 12 hours of negotiations that began on Monday afternoon, and ran through the night.

The latest bailout and a private creditor debt write-off worth about another €100bn euros (£84bn) is dependent on Greece implementing a severe austerity package of pay, pension and jobs cuts, as well as finding savings of €325m in this year's national budget.

Darling told the BBC Radio 4 Today programme that both the eurozone and Greece had needed the bailout because they were both over a barrel but he was very sceptical that it would sort out the problems and warned that a dark cloud was hanging over Europe.

"Even if Greece manages to do everything that is being asked for it, in eight years' time they will still have a debt of 120% of their GDP … and you have to ask with a frail economy like Greece whether or not that is possibly realistic in terms of seeing Greece come through that.

"The second thing, which is a problem that is not just going to bedevil Greece but is also affecting the other … weak economies in Europe, and that is where are the policies that are going to get growth? If you don't get growth you don't get the income to get down your borrowing and therefore your debt."

Darling said the "ridiculous treaty" the eurozone had locked itself into risked inflicting perpetual deflation and thereby further suppressing growth.

"I suspect Greece will be back at the table at some point and if the eurozone isn't very fortunate other countries will be back as well. It's highly unsatisfactory."

He said Europe generally and the eurozone in particular had got itself into some terrible problems, with Greece the extreme example of that.

On the bailout deal, he added: "Frankly it needed to be done for both sides but it does not get you out of the woods at all."

Clegg said he hoped Greece would be able to turn things around more quickly than had been the case in recent months.

He told ITV Daybreak: "Well, I hope it will turn out to be a lasting solution, because what we need is a decisive, comprehensive deal for Greece, because I don't think its good for the United Kingdom – it's not good for anybody in Europe – to see the whole eurozone arrangement stumble from one Greek controversy to the next."

He added: "What you're seeing overnight is a big deal, if you like, where billions and billions of pounds of additional support is being given by other members of the eurozone to Greece in return for commitments from Greece to sort things out in their own economy, and I very much hope that this will stick."

Under the agreement, Greece's private creditors have agreed to take deeper losses on their Greek debts, helping to cover a new funding gap that threatened to derail the rescue package – Athens's second since the financial crisis began.

The Greek prime minister, Lucas Papademos, hailed the breakthrough, calling it a historic day for Greece. His finance minister, Evangelos Venizelos, said the agreement would allay fears that Greece would be forced out of the eurozone.

The UK Independence party leader, Nigel Farage, said the bailout would only delay, not prevent, Greek departure from the euro.

"The Greeks don't need Draconian death by a thousand cuts; they need the drachma back so they can reboot their economy."

He went on: "Cheap credit from inappropriate euro membership was a disaster for the Greek economy. Eurozone membership is now also a disaster for their democracy."

He said a bond write-off – Greece's private creditors are forgoing 53.5% of their repayments – was "default by another name", adding: "This so-called bailout is just delaying the inevitable euro exit by Greece.

"It is time to bow to reality and set the Greek people free from this dreadful euro prison."


Hélène Mulholland, political reporter

The GuardianTramp

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