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Greek PM: New debt deal buys time for a new start

A pedestrian passes a vendor selling Greek flags ahead of a national holiday later this week, in Athens, Wednesday, Oct. 26, 2011. European leaders meeting later Wednesday in Brussels are expected to shore up the eurozone bailout fund to contain the continental debt turmoil and prevent Greece from a catastrophic default. A pedestrian passes a vendor selling Greek flags ahead of a national holiday later this week, in Athens, Wednesday, Oct. 26, 2011. European leaders meeting later Wednesday in Brussels are expected to shore up the eurozone bailout fund to contain the continental debt turmoil and prevent Greece from a catastrophic default. (AP Photo/Thanassis Stavrakis)
By Derek Gatopoulos
Associated Press / October 27, 2011

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ATHENS, Greece—Greece's prime minister voiced deep relief Thursday at the new debt relief and bailout deal hammered out by European leaders, which he said has bought the country time to make a new start and will spare future generations of Greeks from a crippling burden.

In an address to the nation, a haggard looking George Papandreou told austerity-weary Greeks that the euro130 billion ($182 billion) package ended months of uncertainty over the country's future.

"Tens of billions of euros have been removed from the backs of the Greek people," he said in live televised comments. "Banks will pay this cost, instead of citizens. But it is a fairer distribution of our debt burden."

Stocks in Greek companies, whose share value has collapsed over the past two years, joined a surge in world markets, with the Athens Stock Exchange's benchmark General Index closing up 4.82 percent at 811.11.

Greece's sky-high rates for long-term borrowing and default insurance also eased slightly.

But opposition parties criticized the landmark agreement, with conservatives warning it condemned the country to "nine more years of collapse and poverty."

The deal requires banks to take on 50 percent losses on Greeks bonds. Eurozone countries and the International Monetary Fund will also provide an additional euro100 billion ($140 billion) in rescue loans as a second bailout package for Greece -- on top of a euro110 billion package agreed last year.

"We have avoided a mortal national danger," Papandreou told a news conference in Brussels after the night-long negotiations.

Greece's troubled euro230 billion ($320 billion) economy is heading into a fourth year of recession, with unemployment at 16.5 percent and taxpayers struggling to cope with a barrage of new taxes on property, purchases and their shrinking incomes.

Finance Minister Evangelos Venizelos said Greeks would not face any new cutbacks affecting their salaries and pensions this year or next -- provided the austerity measures voted on so far are fully implemented.

"I want to say in an absolutely categorical way, that Greece has taken and approved the measures it had to for 2011 and 2012," he said at a news conference after returning from Brussels.

Venizelos said the new deal was more favorable for Greece and harsher on banks than a previous deal reached in July under which banks would have taken a 21 percent loss on their holdings of Greek bonds.

But the minister said the new private sector participation, which is voluntary, would still be attractive.

"I believe that everyone in the private sector understands ... that the formula is in the interests of all and is attractive to all," he said.

The Socialists have 153 seats in the 300-seat parliament, their majority whittled down from 10 seats over two years by opposition to the harsh austerity measures that have triggered frequent strikes, mass protests and violent demonstrations.

Conservative opposition leader Antonis Samaras said the debt deal "perpetuated" mistakes that drove the country into recession.

"We are not closer to the solution, but are faced with nine more years of collapse and poverty. Neither the economy nor society can withstand this," Samaras said.

Prominent left-wing deputy Dimitris Papadimoulis said the agreement would doom Greeks to a deeper recession.

"The deal puts Greece in a eurozone quarantine," he said. "We are now locked in a system of continuous austerity, haphazard privatization, and continuous supervision by our creditors."

He also noted an inherent conflict of interest in the European debt plan.

"Those who monitor us do not have our interests in mind. Their priority is that we pay back our loans," Papadimoulis said.

Some analysts also appeared critical of Thursday's deal, worried that it might fail to improve the sustainability of Greece's euro350 billion ($490 billion) national debt.

"There's absolutely nothing in the package that was agreed that gives us even a modicum of hope that anything along the lines of (economic) development is happening," Yanis Varoufakis, professor of economics at the University of Athens, told AP television.

"We have more austerity and more wishful thinking in terms of how much liquidity can be extracted from the Greek economy, either through privatization or through taxation, in order to pay for these deals," he added.

In the northern city of Thessaloniki, the government did not send a representative to an annual high school parade, a day after anti-austerity protesters there heckled and threw eggs at the country's defense minister.

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Nicholas Paphitis, Elena Becatoros and Theodora Tongas in Athens, and Costas Kantouris in Thessaloniki contributed to this report.