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So to reach a successful outcome, the finance ministers had to fight on many fronts. The representatives of private holders of Greek debt had to agree to steeper losses than they had earlier said was possible in a voluntary debt relief. The Institute of International Finance said the bond swap could see Greece's debt reduced by euro107 billion immediately. On top of that, investors will be asked to give Athens 30 years to repay them, compared with just under 7 years. Average interest rates would fall to 3.65 percent from around 4.8 percent. Jean Lemierre, who was co-heading the talks for the IIF, said overall losses for private bondholders would be above 70 percent when accounting for the new bonds' longer repayment period and lower interest rate. Private investors weren't the only ones having to give ground. The eurozone countries will reduce the interest that Greece has to pay for its first package of bailout loans to 1.5 percentage points over market rates from between 2 percentage points to 3 percentage points currently, cutting both its debt load and limiting the need for new rescue loans. At the same time, the European Central Bank and the national central banks in the countries that use the euro will forego profits on their Greek debt holdings, again reducing the costs for Greece. "It's a very good accord in the sense that it is equitably divvied up," said French Finance Minister Francois Baroin. "The Greeks have made their efforts. The Europeans are playing their supporting role, in their role as creditors ... And the private sector part goes beyond" what could be expected. But several hurdles remain before Greece will see any of the money or other benefits of the new program. Apart from the implementation of more than 30 different savings and reform measures by Greece, the new bailout has to be debated by parliaments in several member states, including Germany, the Netherlands and Finland. The IMF also still has to decide how much of the euro130 billion bill it is willing to stump up. Going into the meeting, the Washington-based fund had indicated its contribution will be lower than the one-third of the total it has provided in previous bailouts. IMF chief Lagarde said the fund's board would decide on its contribution in the second week of March. "In doing so it will have in mind the overall program, but also additional matters such as the proper setting up of a decent firewall," Lagarde said with reference to Europe's current and future bailout funds. At the moment, the overall ceiling for eurozone rescue loans has been set at euro500 billion ($663 billion), much of which has already been committed to Ireland, Portugal and now Greece. Euro leaders will decide at their summit in early March whether that ceiling should be increased. On top of that, it will also take some time to see how many private creditors will participate in the debt relief and how many will have to be forced to sign up through new legal clauses. The representatives of the private bondholders said they were confident that investors would find the deal attractive, but some analysts fear that imposing losses on even some bondholders may destabilize markets. Perhaps most crucially, however, may be new national elections in Greece scheduled for April, which could upend the political landscape in the country. The leaders of the two main parties have committed to the cuts and reform program, but anti-bailout parties have been gaining in the polls.
[Associated
Press;
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