Eurozone finance ministers on Monday approved a second bail-out fund of130 billion euros for Greece. The deal comes after Greece managed to secure the biggest debt writedown in history. In a move that has saved the country 100 billion euros, private investors exchanged their bonds for new ones worth half their value.
President of the Europgroup Jean-Claude Juncker said that the PSI agreement will see Greece’s debt falling even below the original target.
As Greece’s problems have lost urgency, the Euro group turned its attention to Spain.
As the 4th largest economy in the euro zone, experts say Spain may be too big to default and too big to be bailed-out. The Spanish government challenged the so-called fiscal compact by announcing a higher deficit target for this year.
After long negotiations, finance ministers agreed to allow Spain a higher public deficit. However, the concession is tougher than expected. Brussels wants Spain to commit on a 5.3% deficit goal. This is 5 billion euros more in cuts that expected.
With an unpredicted recession this year, an unemployment rate of over 20% and a general strike over labour market reforms, things are not looking very bright for Rajoy’s government.
Rajoy bought himself some time. Viktor Orban, however, saw the European Commission freeze Hungary’s regional funds over an excessive deficit only last month.