Euro officials reach deal to reduce Greek debt

November 26. 2012 -

BRUSSELS (AP) — A European Union official has told The Associated Press Tuesday that a deal has been reached that would pave the way for Greece to receive the next installment of its much-needed bailout loans.

Part of the agreement is that the target for Greece's debt levels -- one of the conditions of the deal going ahead -- would reach 124% of its gross domestic product by 2020. The original goal had been 120% of GDP.

Mario Draghi, President of the European Central Bank, welcomed the agreement.

"It will certainly reduce the uncertainty and strengthen confidence in Europe and in Greece," Draghi said.

This was the third time in the last two weeks that finance ministers from the 17 European Union countries that use the euro had tried to hammer out a deal on the next installment of bailout money for struggling Greece.

The installment, desperately needed by Greece, will total some €44 billion ($57 billion).

Greece, which is heavily in debt, is predicted to enter its sixth year of recession shortly, and there had been fears that it might be forced to drop out of the eurozone, destabilizing other countries in the process.

The so-called troika of the European Central Bank, IMF and the European Commission, which is the 27-country EU's executive arm, have twice agreed to bail out Greece, pledging a total of €240 billion in rescue loans — of which the country has received about €150 billion so far. In return for its bailout loans, Greece has had to impose several rounds of austerity measures and submit its economy to scrutiny.

Greece's fortunes are inextricably tied to the rest of the eurozone. Without the bailout funds that have been keeping it afloat since May 2010, the country would default and could end up having to leave the eurozone. This could have a domino effect on other financially troubled eurozone nations.

Any political agreement made on Tuesday will have to be submitted to national parliaments in some countries. After that, the finance ministers plan to hold another meeting, either in person or by telephone, to give final approval to the disbursement.