Greece will produce no more primary budget deficits from next year, but some of the country’s banks may face temporary nationalization as a result of the debt relief, he warned.
“The debt is absolutely sustainable now,” Papandreou told a news conference after a meeting of euro zone leaders, which reached agreement with private investors on a 50 percent write-down.
“Let’s hope a new and better day dawns, both for Greece and for Europe… Greece can settle its accounts from the past now, once and for all”.
Debt-laden Greece needed the drastic measure to avoid a sovereign bankruptcy that was threatening to engulf other weak members of the eurozone periphery such as Ireland, Portugal and Italy.
Under the 130-billion euro deal, Greece will obtain 30 billion euros upfront from other governments, as a guarantee for banks that will take part in the voluntary reduction of 100 billion euros of the debt they hold.
Papandreou said he expected the deal, which will be implemented through a bond exchange, to be wrapped up by the end of the year.
The deal cuts Greece’s debt by 50 percentage points of GDP, compared with just 12 percent under a previous EU deal struck in July, Papandreou said.
If Greece pushes reforms fast enough, it may even manage to return to markets much faster than 2021, as currently predicted by the International Monetary Fund (IMF), he added.
“Enough with primary budget deficits, from next year on there won’t be any, we’ll be passing to primary surpluses,” Papandreou said.
The haircut is expected to impose big losses on the country’s banks and state-run pension funds, which are up their necks in toxic Greek government bonds of about 100 billion euros.
The government will replenish pension funds’ capital, but banks may face temporary nationalisation, Papandreou said.
“It is very likely that a large part of the banks’ shares will pass into state ownership,” Papandreou said. He pledged, however, that these stakes will be sold back to private investors after the banks’ restructuring.
“After restructuring we will then take it (the shares) out to the market, as other countries have done… it is a very standard procedure and nothing to be afraid of,” he said.