PM hails euro zone pact, warns of work ahead [UPDATE]

Prime Minister George Papandreou told a Cabinet meeting on Friday that a deal reached by euro zone leaders in Brussels was ?a vindication of our efforts, of the efforts of a whole nation that found itself close to collapse due to the errors of the past,? and thanked Greeks for their patience, persistence and self-sacrifice.?

What is crucial now, the premier said, is that the government does not lose momentum in implementing crucial reforms. ?Everything we have achieved to date will be lost if we do not continue with our efforts,? he said. ?We still have lots of work to do.?

The premier said the alternative was too grim to contemplate. ?Greece will change, with dialogue, but radically and decisively so that our children don?t have to change the lethal risk of bankruptcy.?

Papandreou reached out to Greek opposition parties who have snubbed repeated appeals for consensus, accusing them of ?watching from the stands rather than joining the action on the track.?

Earlier, at a press conference in Brussels, Papandreou had hailed a deal by euro zone leaders that will allow Greece to continue receiving emergency loans and reduce the country?s debt burden, saying that it ?created a sustainable path for Greece? and protected it from the vagaries of credit rating agencies but he warned that Athens could not afford to sit on its laurels as tough reforms still had to be pushed through. He said the decision «guarantees the sustainability of Greek debt and secure the country’s borrowing needs up to 2020 and said that it was ?significant decisions not only for Greece but for the euro zone as well.”

But the premier, though visibly relieved by the agreement, emphasized that the pact did not signal the end of Greece?s headaches. ?All will go to waste if we don’t continue with our reforms program.? ?Greece will change,? he said. ?We want a different Greece and once the changes are implemented, we will have a different Greece,? Papandreou said, referring to a raft of austerity measures and reforms that were voted through Parliament last month.

Finance Minister Evangelos Venizelos, who is now spearheading the austerity drive, told the same press conference that the euro zone?s decision was ?a positive messageto Greece, the European Union and to citizens? and ?sent a very clear message to the markets too,? referring to speculators that Athens has blamed for betting on the country?s default.

The package, which European Commission President Jose Manuel Barroso described as ?very credible,? additionally seeks to prevent the debt crisis that has afflicted Greece, Portugal and Ireland from spreading to other members of the eurozone. In a bid to prevent contagion, the 17 leaders agreed to give greater flexibility to the European Financial Stability Facility (EFSF) that would allow the fund, created in the wake of the Greek crisis, to also buy back bonds from Greece in a further bid to reduce the country?s debt load.

?The private sector involvement is for Greece and Greece alone,? said Barosso. ?It is a unique solution.?

It was also agreed that the maturities of the loans from the EU and the International Monetary Fund would be increased from 7.5 years to 15 years and the interest rate would be reduced from 4.5 to 3.5 percent. Also, Athens will be given a 10-year grace period on new loans.

?This will lead to the lightening of the burden on the Greek people,? added the prime minister, who insisted Greeks were ?proud, creative and hardworking.?

Papandreou also referred to an agreement to create a ?European-type Marshall Plan? or ?Greek plan for growth.?

The Institute of International Finance (IIF), which represents bankers and insurers, said it offered a plan to exchange and roll over Greek debt that will save the country 54 billion euros over three years. The IIF said the voluntary plan aimed for 90 percent participation by private bondholders.

The involvement of private investors is likely to lead to credit rating agencies deeming Greece to be in selective default but the impact of such a development was dampened by European Central Bank President Jean-Claude Trichet reversing the ECB?s position and agreeing to accept defaulted Greek bonds as collateral

The eurozone chiefs agreed that the EFSF could be used to finance Greek lenders, easing the pressure on the local banking sector, which owns more than a quarter of Greek public debt and will be hit by participation in any voluntary haircut or buyback scheme.

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