Eurozone seals Greek bailout deal

Finance ministers sealed an unprecedented deal early Tuesday for a new 237-billion-euro ($310 billion) bailout designed to keep Greece in the eurozone.

Luxembourg Prime Minister Jean-Claude Juncker announced the agreement to "secure Greece's future in the eurozone" after 13 hours of talks in Brussels between governments, the EU, the IMF and private creditors.

Juncker, head of the Eurogroup of finance ministers, said that "up to 130 billion euros until 2014" in loans from Greece's currency partners would be dependent on the successful take-up of a nominal write-down of 53.5 percent of privately-held Greek debt.

Negotiators for the banks said this should deliver 107 billion in cuts to Greece's 350-billion total debts.

The Eurogroup will decide whether this exchange of devalued old bonds for new IOUs on rewritten terms has been "successful" in early March, Juncker underlined.

Greek Prime Minister Lucas Papademos pronounced himself "very happy" at the massive ) bailout agreed by eurozone partners and private creditors.

Papademos, a former European Central Bank No. 2 backed by European Union partners to lead an emergency coalition government in Athens, acknowledged that full delivery of the deal depends on Greece delivering on a string of conditions in "a timely and effective manner."

However, he maintained: "I'm convinced that the government after (an April general) election will also be committed to implement the programme fully... because it is in the interests of the Greek people."

Italian Prime Minister Mario Monti on his way out of the talks, echoed that it was "a good result for Greece, the markets and the eurozone."

The market's initial response was favourable, with the euro jumping more than one US cent after news of the deal emerged, rising to $1.3291 within minutes, and also gaining against the yen.

However there were also voices of caution and reminders that the eurozone deal cannot provide a magic bullet.

"Even with this agreement, most of Greece's problems lie ahead of it, not behind,' said Brussels-based analyst Sony Kapoor.

The financial lifeline also remains contingent on a string of Greek economic and legal reforms to be implemented by the end of the month, as well as the "permanent" presence of EU and IMF officials on the ground in Athens to run the rescue programme.

"It is a very good agreement and I welcome the commitments of the Greek government to restoring growth and stability," said European Central Bank (ECB) chief Mario Draghi.

He underlined that "the implementation of the agreement must be rightly monitored."

Athens faces debt repayments of about 14.5 billion euros on March 20, and this deal is intended to avoid state bankruptcy.

The deal, which updates an October agreement reached among national leaders that went awry with Greece spiralling deeper into recession, "provides a comprehensive blueprint" for fixing public finances in Athens and "safeguarding financial stability" throughout the eurozone, a statement said.

Nevertheless, "its success hinges on its thorough implementation by Greece," with government accounts required to reach "primary surplus as from 2013" and a privatisation drive originally to be worth 50 billion euros, the Eurogroup statement added.

Athens is also expected to anchor in its constitution within two months provision for "ensuring that priority is granted to debt servicing payments," resembling a blocked account to protect public lenders' interests.

Papademos acted as go-between with private creditors' representatives.

The IMF said it will fix its contribution in March, by which time the eurozone is also set to boost its financial firewall to 750 billion euros, in anticipation of a concurrent boost to IMF resources mainly from G20 countries.

IMF chief Christine Lagarde said a decision would be made in the second week of March.

National eurozone central banks also agreed to contribute via their own write-down of Greek bonds.

The deal is intended to bring government debt in Athens down to 120.5 percent of gross domestic product (GDP) by 2020.

This is just a fraction above the 120-percent target set by the EU and the IMF.

It meant a 5.5-billion-euro gap in funding was filled, bringing it down from an estimated 129 percent according to the latest analysis by international creditors.

This report showed that in the worst-case scenario, Greece would need a whopping 245 billion euros in bailout aid by 2020, eurozone sources said.

A eurozone governmental source told AFP the nightmare scenario "probably helped in the effort" to bring the bailout package closer to achieving that goal.

Greek Finance Minister Evangelos Venizelos had signalled "a long period of uncertainty coming to a close" early in the day.

Eurozone hardliners' patience with Greece almost snapped over recent weeks with growing suggestions Athens could be cut adrift, although 3.2 billion euros in fresh spending cuts and pledges by leaders of left and right to carry through reforms long-term swung waverers.

Many euro partners see Greece as the victim of decades of chronic financial mismanagement by dynastic political forces -- what Italian Prime Minister Mario Monti last week called a "perfect catalogue" of errors.

Ahead of a general election in April, the new bailout has been likened to the aid equivalent of a hospital drip after the failure of an initial 110-billion-euro EU-IMF rescue approved nearly two years ago.