European Union Decides To Bail Out Greece, Again

European leaders have agreed on a massive new bailout plan for Greece. They also agreed to broader measures to deal with the continent's debt problems. Greece is receiving $156 billion to keep it afloat and a reduction in interest rates.

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European leaders have struck a deal to bail out Greece again.

But as Teri Schultz reports, financial markets must still decide if it's a good agreement.

TERRI SCHULTZ: Greek Prime Minister George Papandreou appeared emotionally touched that eurozone colleagues have agreed, in his words, to lighten the Greek burden.

Prime Minister GEORGE PAPANDREOU (Greece): We are a proud people. And the only thing we are asking for is the right to make major changes in our country.

SCHULTZ: What they're getting is $156 billion to keep Athens afloat for now, a reduction in interest rates on their loans, and lengthening of the repayment periods. Most controversially, private-sector bondholders have agreed to take a 21-percent loss as their one-time contribution.

EU President Herman van Rompuy says this will finally stop the contagion.

Mr. HERMAN VAN ROMPUY (President, European Union): We created a solid firewall and better fire brigade equipment.

SCHULTZ: What Van Rompuy hopes will better douse the debt crisis is the expansion of what's called the European Financial Stability Facility. This fund will now be able grant loans or provide other assistance to struggling governments before they need a bailout.

But economic analyst Raoul Ruperel of the Open Europe think-tank believes a Greek default is still unavoidable. He says everyone should admit it and work on recovery instead of limping along between bailouts while investor confidence evaporates.

Mr. RAOUL RUPEREL (Economic Analyst): Although you do get the negatives of a default, you don't quite get the positives of a full restructuring.

SCHULTZ: Bruce Stokes of the German Marshall Fund says while default may be an eventuality, he doesn't believe the EU system was ready for that yet.

Mr. BRUCE STOKES (German Marshall Fund): They're walking on the edge of a cliff and any misstep, they fall over the cliff. And their real problem is they need to put in place some safety nets for themselves.

SCHULTZ: Stokes says now they've got some nets, but nobody really knows what's next.

For NPR News, I'm Terri Schultz in Brussels.

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