BRUSSELS - A second huge bailout in two years may have staved off bankruptcy for Greece, but for Europe’s finance ministers it did something even more important: bought the eurozone valuable time.
During all-night talks that ran until yesterday morning, ministers, officials, and bankers pulled off a $172 billion deal designed to avert the alarming prospect of a disorderly default in Greece.
And for Greece’s eurozone partners, the agreement provides crucial weeks to build a credible firewall to protect the bigger economies of the euro currency bloc, and to put in place new economic policies in Italy and Spain. With little confidence in Greece’s ability to deliver on the austerity measures its lawmakers have approved, European officials are moving swiftly to the task of bolstering their bailout fund for the euro.
If the debt crisis can be contained to Greece, which represents around 2 percent of the combined eurozone economy, then the currency is generally thought to have good prospects of recovery.
Olli Rehn, the European commissioner for economic and monetary affairs, addressed the concerns about contagion yesterday after the meetings ended.
“Firewalls are being strengthened,’’ he said. “We had a good discussion last night and today in this regard, and I expect decisions from the leaders of the EU in the summit of March 1 and 2.’’
Rehn said he favored a system that would combine the firepower of the new, permanent $662 billion European Stability Mechanism with the money still left in the coffers of the temporary European Financial Stability Facility - likely to be around $185 billion after the second Greek bailout.
Germany, with the biggest eurozone economy, has given no sign that it will agree to such a plan, but pressure is mounting.
Although the meeting in Brussels lasted more than 13 hours, a deal never really seemed in doubt. Even during the opening discussion Monday afternoon, ministers made it clear that they wanted an agreement, according to another official not authorized to speak publicly.
Greeks were torn between relief and foreboding on the news that their country has received a new massive bailout - while the aid will protect them from default and keep them in the euro bloc, it will also cost households years of economic hardship.