BRUSSELS (MNI) – A deal struck here early Thursday morning for a
50% voluntary private sector haircut on Greek bonds will make Greece’s
debt load “absolutely sustainable,” the country’s Prime Minister George
Papandreou said here in the early hours following a tense overnight
summit of Eurozone leaders.

Papandreou welcomed the deal, declaring that, “today we avoided
Greece’s destruction.”

The debt deal, which went down to the wire and looked at times like
it would never happen, was part of a three-pillar plan announced by
Eurozone leaders in their latest attempt to tame the financial crisis.
The other two pillars were a plan to recapitalize Europe’s banks and the
a strategy to leverage the resources of the European Financial Stability
Facility, giving it an estimated E1 trillion in firepower.

But while more specifics were given than had been expected, many of
the key details are not expected to be worked out until November. In the
case of the Greek debt restructuring, it could take until the end of the
year or beyond to know how many banks will sign on. Papandreou said he
wanted to conclude the debt writeoff deal with banks “by the end of the
year.”

He said that it was “a fair deal” for banks to shoulder more of the
losses than they had been expected to in July, when Eurozone leaders and
banks crafted a plan for a mere 21% writeoff of Greek debt.

With a wary eye on the Parliament in Athens, which must approve
today’s deal, Papandreou noted that there would be no additional cuts in
salaries or pensions as a result of it — unlike the one in July, which
required the Greek government to make additional draconian cuts.

Papndreou said that recapitalization of Greek banks “will be
necessary,” given the high volume of Greek sovereign bonds they hold. He
hinted at partial nationalization of the banking sector, saying it was
possible the shares of some Greek banks would be transferred to the
state. But he said the banks would “be supported by the European union.”

Contrary to concerns heading into the debt restructuring
negotiations with banks, Greek insurance funds, which also hold large
volumes of sovereign debt, “will not lose their assets,” the prime
minister pledged.

Seeking to downplay another element of today’s rescue package —
the stiffening of outside fiscal and economic surveillance to the point
of sovereignty loss — Papandreou insisted that “the ultimate
responsibility for the Greek program is with the Greek government.”

He said Greece would start producing primary surpluses from next
year on, without elaborating.

Expressing what was surely the fondest hope and greatest worry of
all parties to the summit, Papandreou said, “I hope markets react
positively.”

–Angelika Papamiltiadou, a_papamiltiadou@marketnews.com

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