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Antonis Samaras
The Greek prime minister, Antonis Samaras, said he was confident Greece was doing everything it had to in order to get a deal. Photograph: Bogdan Cristel/Reuters
The Greek prime minister, Antonis Samaras, said he was confident Greece was doing everything it had to in order to get a deal. Photograph: Bogdan Cristel/Reuters

Greece close to €31bn bailout deal

This article is more than 11 years old
As European leaders prepare for summit, troika says broad outlines agreed on austerity measures Greece must impose

Greece has reached an agreement on "most of the core measures" to secure the release of the next €31bn tranche of its bailout as Europe's leaders prepared for a crucial two-day summit.

A statement from the troika of the European Commission, European Central Bank and International Monetary Fund said it had left Athens after "comprehensive and productive discussion" agreeing the broad outlines of the austerity measures Greece will be forced to impose in exchange for the latest payout.

Speaking in Bucharest at a meeting of right-of-centre leaders from across Europe, Greece's prime minister Antonis Samaras said: "I'm confident we're doing everything we have to do in order to get [a deal] and get it soon, so that we can move towards a recovery."

The details are expected to be finalised next week and any new commitments Samaras makes will be scrutinised by the electorate, which voted him into power earlier this year on the promise of exacting more lenient conditions from the troika.

Greece has seen violent protests against the stringent spending cuts and structural reforms imposed as part of previous bailout deals.

Europe's financial markets had rallied on Wednesday even before the upbeat signals from Greece, after Spain dodged a widely expected downgrade to junk status from ratings agency Moody's.

Spanish 10-year bond yields fell to a six-month low of 5.5% and the Ibex stock market in Madrid jumped by 1.4%, after Moody's confounded investors' expectations and left the country's rating unchanged.

In London, the FTSE100 closed up 0.69% at 5910.91.

Moody's said its judgment was based on the expectation that Spain would seek help from the single currency's bailout fund, the European Stability Mechanism.

That in turn could trigger massive purchases of Spanish bonds under the ECB's plan for "outright monetary transactions", announced by its president, Mario Draghi, last month, helping to drive the country's borrowing costs down further.

But Spain's prime minister, Mariano Rajoy, has so far resisted applying for help from the eurozone, fearing that it will mean surrendering political sovereignty.

Despite Wednesday's more optimistic mood, some analysts cautioned that even if a Spanish bailout does trigger the OMT, it will not bring the long-running crisis to a close.

"The OMT is a liquidity measure, it does not address solvency," said economists at City consultancy Fathom. "As such, it can only buy time; it cannot solve the structural flaws behind the European debt crisis. A more comprehensive resolution must involve some debt restructuring, both public and private, in peripheral economies to restore sustainability and lay the foundation for growth."

Even the stronger economies at the eurozone's core have seen growth hit hard by the crisis and the German government was forced to concede on Wednesday that it now expects to eke out GDP growth of only 1% in 2013, not the 1.6% it had forecast.

Economy minister Philipp Rösler said: "Germany is navigating stormy waters because of the European sovereign debt crisis and an economic weakening in emerging nations in Asia and Latin America." But he insisted: "We are still talking about 1% growth, so there's no talk about a crisis for Germany.

More on this story

More on this story

  • Greek police clash with anti-austerity demonstrators in Athens – video

  • EU summit leaves controversial issues untouched

  • Eurozone crisis: EU summit day one - as it happened

  • Eurozone crisis: EU summit day two - as it happened

  • France and Germany divided over European economic policy

  • Greece general strike protests - in pictures

  • Greeks on general strike in Athens - video

  • Hollande fires warning shot at Merkel over austerity on eve of EU summit

  • Eurozone crisis as it happened:: Markets rise on 'bailout lite' plan for Spain

  • Eurozone crisis as it happened: Relief as Spain avoids being downgraded on eve of EU summit

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