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Austerity Plan Might Ease Greece Out of its 2-Year Debt Crisis

February 9, 2012 at 12:00 AM EST
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JEFFREY BROWN: Now, a political deal in Greece that may pull Europe back from the abyss of its two-year debt crisis.

After weeks of negotiations, the coalition government of Greek Prime Minister Lucas Papademos reported agreement on yet another round of austerity measures. Finance Minister Evangelos Venizelos, speaking in Brussels, said it would satisfy the European Union, the European Central Bank and the International Monetary Fund.

EVANGELOS VENIZELOS, Greek finance minister: After a long, tough period of negotiations, we have finally a staff-level agreement with the troika for a new, strong and credible program.

JEFFREY BROWN: The Greek goal was to win a new bailout of $170 billion and to prevent national default. Under the plan, Greece agreed to cut its minimum wage by more than 20 percent, fire 15,000 public sector employees and end dozens of job guarantee provisions.

Greek leaders also said that, instead of cutting pensions by as much as $400 million, they had found unspecified alternative cuts. The agreement won praise from some, including Christine Lagarde, managing director of the IMF, at a late-day meeting in Brussels.

CHRISTINE LAGARDE, managing director, International Monetary Fund: There’s clearly some very encouraging news coming out of Athens, and after the very heavy-duty work that has been done lately, I think it’s positive.

JEFFREY BROWN: And European markets reacted favorably. Stocks moved upward. The euro traded near two-month highs.

But Germany warned, the deal fell short. The German finance minister, Wolfgang Schaeuble, said the Greeks had not met a requirement to bring national debt down to 120 percent of economic output.

And on the streets in Greece, there was outrage.

MAN (through translator): We took to the streets to fight for our rights and for the future of our children.

JEFFREY BROWN: Electrical workers protested the austerity cuts, and Greek labor unions planned a 48-hour strike beginning tomorrow.

In the meantime, the Greek finance minister said the government also had the outlines of a separate agreement with private creditors. It could cut the country’s private debt in half, with creditors accepting a 70 percent reduction in the value of their holdings.