Bloomberg News

Papandreou Urges ‘Definitive Solution’ to Greece’s Debt Woes

October 24, 2011

(Updates with Juncker comments in fifth, sixth paragraphs. For more on Europe’s debt crisis, see EXT4.)

Oct. 24 (Bloomberg) -- Greek Prime Minister George Papandreou called for a “definitive solution” to Greece’s debt troubles when euro-area leaders meet in two days to craft a new aid package for the country.

“We want to lessen the burden of the debt, a solution that will re-establish credibility,” Papandreou said yesterday in Brussels. He spoke after euro-area leaders met to rework a planned second aid package for Greece in which bondholders are being asked to accept a deeper writedown on Greek debt.

Greece’s economic slump has forced a revamp of a July 21 accord on a new international rescue that foresaw a 21 percent loss for bondholders. That program was to total 159 billion euros ($220.5 billion), including 50 billion euros from banks through debt swaps and rollovers.

Euro-area leaders are due to meet again on Oct. 26 to continue work on the new bailout for Greece and on ways to bolster the region’s rescue fund. Papandreou said negotiations on new financial relief were “tough” and would continue.

Talks on the second Greek aid package are focusing on losses of as much as 60 percent for creditors, according to Luxembourg’s Jean-Claude Juncker, who leads the group of euro- area finance ministers. He said a 21 percent writedown is insufficient to ensure that Greece’s debt of 145 percent of gross domestic product last year becomes bearable.

‘Considerably Higher’

“This will clearly not be enough,” Juncker said Oct. 22 on RTL Luxembourg Television. “It has to be considerably higher. About 50 percent, 60 percent is what’s being talked about.”

Greece’s fully taxpayer-funded original bailout in May 2010 totaled 110 billion euros in loans, including 80 billion euros from euro-area governments and 30 billion euros from the International Monetary Fund.

The aid is tied to budget-austerity steps by the government of Papandreou, who said his fellow euro-area leaders had recognized the sacrifices being made by Greek citizens.

“This national battle has been recognized by everybody,” he said. “We are a proud people. We deserve this respect.”

--With assistance from Stephanie Bodoni in Brussels. Editors: Jones Hayden, Andrew Clapham

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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