Greece hails rebirth of a nation as EU and IMF agree to release loans

Helena Smith in Athens guardian.co.uk, Tuesday 27 November 2012 19.31 GMT

Antonis Samaras says it is a 'new day for Greeks' after creditors agree to redraft package, free up funds and cut debt mountain by €40bn

A man reads a newspaper at Syntagma square, Athens, after the EU and IMF redrew a rescue package. Photograph: Angelos Tzortzinis/AFP/Getty Images

After months of drama in the eurozone and its own solvency hanging by a thread, Greece reacted with euphoria on Tuesday at the news that international creditors had decided to not only revitalise its rescue programme, releasing long-overdue aid, but cut €40bn (£32bn) from its debt mountain.

Addressing the Greek nation, the prime minister, Antonis Samaras, said the landmark agreement opened the way to the country's "rebirth" after one of the darkest periods in its modern history. The deal had not only averted bankruptcy and secured Athens' position in the eurozone but placed it on a path of economic recovery.

"A very grey and very dark period for Greece closed definitively," said the prime minister, whose fragile coalition had put its future on the line by endorsing a fresh round of unpopular austerity measures and structural reforms in return for further assistance from the EU and IMF.

"Greece has managed to win its credibility again. It has managed to transform a programme of endless austerity into a programme that dares [to enact] reforms and will lead to growth," added a tired looking but visibly relieved Samaras.

Three years after Europe's economic crisis erupted in Athens, the foundations had finally been laid to ensure that Greece's "most tortuous and destabilising problem" – its massive pile of debt – would become sustainable, he said. From being the eurozone's most indebted nation, Greeks can now expect to see their debt load cut to 124% of GDP in 2020 from the projected 190% of national outlay in 2014, under a package of measure that include a bond buy-back and various interest rate cuts on official loans.

"The agreement has secured the immediate disbursement of capital," Samaras told Greeks, emphasising that the installment would be bigger than the €31.5bn Greece had been on track to receive. "The recapitalisation of banks will protect the deposits of Greek people and primarily pave the way for liquidity to return to the Greek economy."

Following months of uncertainty over Athens' place in the 17-nation eurozone bloc – spawned to a great degree by debate over its ability to deliver reforms – officials described the deal as a major vote of confidence in Greece.

Until last week, the issue of reducing Greece's debt – a source of great friction between the EU and IMF – had not even been on the table. "It guarantees Greece's place in the hardcore of Europe," said the interior minister, Evripides Stylianides, a senior cadre in Samaras' centre-right New Democracy party.

"We got the maximum that we could have won," he told state-run TV, emphasising that Athens had not only succeeded in achieving the cash injection but an extra two years to meet fiscal targets.

But while there was universal consensus that the deal will go down as a defining point in the euro debt drama, party leaders on both the left and right also agreed that for a country that has constantly defied easy quick fixes the latest rescue formula was another case of foreign lenders – especially pre-election Germany – buying time. With austerity the price of continued assistance, analysts questioned the efficacy of a rescue that would once again preclude growth and development in a country whose economy is on course to contract by an unprecedented 25%, all a result of internationally mandated spending cuts.

"It does not include a viable plan [of growth and development] for Greece and that's why it's not a deal," said the main opposition leader, Alexis Tsipras, whose radical left Syriza party has argued that Greece's only hope is to reject the very policies that have prompted the economic death spiral. Economists, likewise, claimed that Athens' debt mountain would only become manageable once it had been reduced to 90% of GDP, in keeping with other eurozone member states.

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